The Crypto Jedi Issue 4: How To Spot Crypto Scams and Rugpulls

1-A Dusting attack

is a new type of crypto scam that’s been making the rounds lately. They are a type of malicious activity in which bad actors send very small amounts of cryptocurrency to victims’ wallets that they didn’t ask for or purchase. To demonetize victims, the victims need to attempt to sell these tokens.

This scam involves creating small amounts of a cryptocurrency, and then “dust” them onto addresses belonging to unsuspecting victims. Once the dust has settled, the attacker then uses these tiny holdings to track the victim’s activities and even deanonymize them.

2-Promises of astronomical returns?

Suspicious. If an investment sounds too good to be true, it probably is. This old adage applies to the world of cryptocurrency. If a project is promising returns that are much higher than what’s considered normal, be very wary.

Do your research and make sure that the project is legitimate before investing any of your hard-earned money If an investment opportunity promises to make you rich quickly, it’s probably too good to be true.

Be especially wary of opportunities that guarantee returns, regardless of market conditions.

3-Lack of transparency

Suspicious. When it comes to your money, you have a right to know where it’s going and how it’s being used. If a project is vague about how they plan to use your investment, or if they’re not forthcoming about their team or roadmap, that’s a major red flag. Any reputable project should have no problem.

A legitimate project should have a clear roadmap and whitepaper outlining the team’s plans and objectives. If there is no information available about the team or the project, it’s best to steer clear.

4-Stealth minting.

Suspicious. One of the most popular crypto scams right now is “stealth minting.” This occurs when a project secretly mints new tokens and then sells them off-exchange, without disclosing this information to investors.

This can artificially inflate the price of the token, and when the news finally comes out, the price takes a nosedive. This type of scam is especially prevalent in the DeFi space, so be extra cautious when investing in these types of projects.

These are just a few of the many red flags to watch out for when evaluating an investment opportunity. By being aware of these scams, you can protect yourself and your hard-earned money.

5-Anonymous team?

Suspicious. A legitimate project should have nothing to hide. If the team is anonymous or refuses to disclose information about themselves, that’s a major red flag.

Be sure to do your research and only invest in projects where you feel comfortable with the team.

If the team behind a project is anonymous, it’s harder to hold them accountable if something goes wrong. Look for projects with a transparent and public team.

No product or prototype?

Suspicious. A project that doesn’t have a product or prototype is more likely to be a scam.

If the team can’t show you what they’re working on, it’s best to steer clear. Even if the project does have a product, be sure to do your research and make sure it’s legitimate before investing any money.

6-Social media frenzy

Suspicious. Just because a project is getting a lot of social media buzz doesn’t mean it’s legitimate. In fact, many scammers use social media to pump up the price of their tokens before dumping them on unsuspecting investors.

These projects generate a lot of hype on social media but have little to no activity on legitimate crypto forums and discussion groups. These projects may be using paid shills to generate fake buzz.

Be sure to do your own research before investing in any project, regardless of how much hype surrounds it

7-Insufficient liquidity.?

Suspicious. If a project is not listed on major exchanges and doesn’t have enough liquidity, it may be a rug pull.

Many scammers will create their own exchanges to trade the token, which can be easily manipulated.

Be sure to check the liquidity of a token before investing, and only invest in tokens that are traded on major exchanges.

If a project doesn’t have enough liquidity, you may not be able to cash out your investment when you want to. This can lead to big losses if the project turns out to be a rug pull.

8-High APY?

Suspicious. Be very wary of any project promising high returns. Many scammers use high APYs to lure investors into their trap. Be especially careful of projects promising guaranteed returns, as these are often scams. Do your own research and only invest in projects you understand.

Note

High APY projects are all Ponzi schemes but is this common knowledge and well accepted as fundraising tactics for legitimate projects within the defi community? These projects become scams when the teams are deceptive about their intent.

9-Smooth Operators

Suspicious. The crypto world is full of scammers and rug pullers. They’re often very charismatic, smooth talkers who can be very convincing.

If someone is trying to get you to invest in a project without being able to simply answer your questions or they avoid discussing risk, be very wary. Don’t let anyone pressure you into investing in a project you’re not comfortable with.

10-Poor Effort or lack of development

Suspicious. If a project doesn’t have a working product or prototype, or if the team seems to be inactive, that’s a red flag.

Many scammers create fake projects to raise money and then disappear with the funds. Be sure to do your research and only invest in projects you believe are legitimate.

A project that doesn’t have a working product or prototype is more likely to be a scam. Even if the project does have a prototype, be sure to do your own due diligence to ensure it works as advertised.

11-Pump and dump scheme

Suspicious. Connected to the media frenzy tactic, a project that may be a pump and dump scheme if it has a lot of social media buzz but little activity from the developers, on legitimate crypto forums and discussion groups.

These projects may be using paid shills to generate fake buzz. Be sure to do your own research before investing in any of these.