If you are looking to utilize the services of a company or individual for an investment opportunity that involves cryptocurrencies, the rule of thumb is DYOR, or do your own research. Here are a few do's and don'ts to implement to help protect yourself from investment scams:
- Ask questions: Some examples of the questions that you should be asking are: With which financial authority are you registered? Which regulations are you required to comply with? How does the investment work? Keep in mind that fraudsters and scammers have no incentive to set you straight, so take the time to corroborate what they've told you from trusted sources.
- Understand how the investment works: If you're unfamiliar with how a particular investment works, make sure to read up on the subject by yourself using multiple trusted sources, and cross-reference that with what the information that the company/individual that you're doing business with has provided. Verify the investment scheme with a credible source by checking with either a trusted financial advisor or lawyer.
- Get information on fees & rates upfront and in writing: A common tactic is fees upon fees - legit services and brokers will always let you know what fees are incurred before your initial investment. Know that you should not have to pay a fee to withdraw your profits, to open a wallet/ generate a wallet address, or pay any government office/ regulatory/ shipping fees in cryptocurrency.
- Know who you're investing with: Take the time to verify the authenticity of the individual's or company's identity and requirements. Make sure they are registered and regulated by an official financial authority. Always check for yourself, as anyone can claim to be registered and regulated, even if are in fact not. Resources - US: SEC database, Canada: NRS database Australia: ASIC database UK: FCA database
- Check out reviews: Trustpilot is one of the many resources available, but if you're using a simple Google search, then type in the name of the company or individual and add scam to the search string. For example, "Company ABC scam" or "Company ABC review". Recurring negative reviews or a lack of client reviews is one of the fastest ways to know who you're dealing with. Keep an eye out for reviews from individuals regarding Blockchain Recovery Experts - just like guaranteed profits, they do not exist.
- Keep up to date: Tactics that scammers and fraudsters implement are constantly evolving. Keep up to date with alerts from trusted sources: FINRA investor alerts, SEC investor alerts, Scamwatch official site, Scamwatch official Twitter account, Getsmarteraboutmoney official Twitter account
- Searching for investment opportunities that are advertised on social media: Facebook, Instagram, Twitter, etc. Be especially wary if the company does not have an official site.
- Investing in an ICO if you are new to the cryptocurrency industry: ICO's carry a large risk, and there are many fake coins out there with big celebrity names attached (even though said celebrities may not know their name is being used for this purpose). Get familiar with the industry over time and research the history of ICO's before taking the plunge.
- Give anyone remote access to your cellular device or desktop: Whether it be through Anydesk, ThinVNC, or any other TeamViewer alternative, you should never give anyone access to your device, nor should you let anyone clone your device.
- Give anyone access to your personal or financial details: Sensitive information should be kept private. Never share your private keys, bank account information, credit card details or login credentials with anyone.
- Respond to unsolicited investment and opportunities: Real brokers and investment companies do not make cold calls or reach out using other mediums in order to gain new clients. If someone reached out to you out of the blue with an exciting investment opportunity, beware.
- Take the word of an individual that you met online or a website at face value: Anyone can easily make a professional - looking website in a few hours, or falsify information. As stated above, always DYOR, and check out when their site was registered using tools such as Whois. Sites that are less than 6 months old are a big no-no, and sites that are less than a year old require further research on your part.
- Rush any financial decision: If you are being pressured to deposit now or given a time contingency, be wary. Any financial decision is a big one that should not be rushed or taken lightly, and legitimate companies will not try to pressure you into depositing immediately. Remember, cryptocurrency transactions are irreversible by design, so once you've sent your coins out, you have no way of recovering them, and many illegitimate services capitalize on this fact.
Red flags to look out for
If one or more of the following criteria pertain to your situation or the 3rd party service that you want to invest with, it could be a scam:
- Guaranteed profits (especially if they mention that there is little to no risk involved)
- Sounds too good to be true
- Required referral to register
- Pressure to send money now
- Added fees that were not previously mentioned in your initial agreement
- Unregulated brokers/account managers/ companies/ business partners
- Unsolicited offers
- Sites that were registered recently and/or have spelling or grammar mistakes