How to Identify Fake Cryptocurrency ?

As digital finance continues to shift, genuine potential for profit has attracted not only legitimate investors. Bad actors and scams started to infiltrate the space, which now has an explosion of cryptocurrencies, ICO's and now the blockchain-based asset space, following closely behind the crypto wave. Trying to identify fraudulent versions of fake cryptocurrencies is critical for everyone moving into the crypto space, both seasoned traders and first-timers alike. The following will help you also potentially identify fraudulent tokens and scams, as well as discuss how to use a service like our ICO scam reversal service if you have lost money on a scam.

Understanding Fake Cryptocurrency and ICO Scams

Fake cryptocurrencies are illegitimate tokens or blockchain projects designed to deceive users. Typically sublicensed through questionable ICO schemes or social media hype, fake cryptocurrencies will always promise investors lucrative returns, then vanish once successful in extracting cash from the investor.

In years past, the initial coin offering model created a wealth of hype from startups raising money in a post-product phase of their business. Unfortunately, fake ICOs have become a trend adopted by fraudsters. In fake ICO scam investigations, teams come revealing no technology, relying on a plagiarized white paper, and false claims and promises around return on investment. During the transaction, investors transferred cash expecting to receive a token of brand value, only to discover that the entire operation was a fake.

Some red flags :

• Anonymous or unidentified team members or leadership
• A plagiarized white poster, or just no technical details offered at all
• There is no use case or problem based on which the token solves
• Overly aggressive marketing strategies on social media with no real evidence to back it up
• No formal audit or review of the code from a trusted third party.

Steps to Identify and Avoid Fake Cryptocurrencies

To protect yourself from scams, remember these basic due diligence steps before purchasing any digital asset.

a. Research the team

Regardless of the project, you will always want to research the team behind it. Are the founders and developers known publicly? Are they active on LinkedIn or Twitter? Did they have any professional blockchain background history? Most fake ICO scam investigation cases started with anonymous or unverifiable project founders.

b. Audit the Whitepaper

A project whitepaper should outline the technical infrastructure, the problem that is being solved, and the roadmap for their project. Any overly vague whitepaper or overly technical whitepaper without a business use case could be providing cover for fraud.

c. Assess Community Engagement

Real crypto projects will usually have a community on platforms like Discord, Telegram, or Reddit. Bots or no community, it is a red flag!

d. Verify Smart Contract Audits

Projects with credible backgrounds will usually get their smart contracts thoroughly audited by a reputable 3rd part firm. If no auditable smart contract exists or it was completed by unknown entities, then consider it a warning.

e. Analyze the Tokenomics

Tokenomics usually indicates the relationship between supply and ownership. Be careful of tokens where the dev team owns a high percent of the total supply or if there is no clear distribution model at all. Tokenomics can be misleading and is often constructed to manipulate; avoid these!

Common Types of Cryptocurrency Frauds

The crypto marketplace has spawned a variety of scams beyond phony tokens and ICOs; therefore, every one of us needs to know what these scams look like.

a. Pump-and-Dump Scams

A group artificially inflates the price of an obscure token through fake promotion, sells at the top, and leaves the average person holding worthless coins.

b. Phishing Scams

A hacker tricks a user into giving up private keys or login information through fake websites, emails, and wallet apps. You can use services that specialize in retrieving stolen funds from crypto fraud, and they may be able to locate the assets if you realize you have fallen victim to a phishing scam.

c. Impersonating Legitimate Tokens

A scammer creates fake tokens that use a close name of a popular coin for the purposes of lying to unsuspecting investors.

d. Rug Pulls

A project is launched and takes liquidity, and the developer runs off with the money, leaving investors with useless tokens.

e. Fake Wallets and Exchanges

Some mobile apps and online exchanges are solely created to steal user credentials and crypto assets.

What To Do If You’ve Been Scammed?

Losing money to a crypto scam is an emotionally and financially painful experience. However, all is not yet lost. Follow these steps :

a. Gather All Evidence

Collect in one place any communications, transactions, emails, and social media links related to the scam.

b. Report to Authorities

Speak to your local police as well as report the scam to regulators (including the SEC in the U.S., FCA in the U.K., and other national authorities).

c. Get Professional Help

Some companies provide professional bitcoin refund and asset recovery services. Firms that specialize in bitcoin refunds and asset recovery use blockchain forensics to follow lost assets through the system. Some work with exchanges or law enforcement in asset recovery.

d. Seek out Crypto Recovery Services

Some firms have expertise in cryptocurrency scam reversal and have had success in recovering part or whole the losses. They generally provide a combination of blockchain analytics, legal follow-up, and negotiation with exchanges.

e. Stay in the loop

Joining crypto forums and news groups can keep you informed about the latest scams and bad actors in the industry.

How Recovery Firms Assist Victims of Crypto Scams ?

Services offering fake ICO scam reversal or other recovery mechanisms have an important role to play in helping victims restore their financial health. These services typically focus on investigating the mechanics of the scam, attempting to identify perpetrators, and collaborating with exchanges and authorities to attempt recovery of those funds.

Some of the key components of genuine crypto funds recovery services include :

• Experience in blockchain forensics
• Legal connections for cross-border matters
• Confidential use and reporting
• Established success in recovery services

A reputable firm gets you funds back from fraudster but fulfills the duty of educating you and advising on how to protect your bitcoin and other digital holdings in the future.

Frequently Asked Questions (FAQs)

1. Can I get back money that I lost from a fraudulent ICO ?
   
   Yes, it can be difficult, but it is often possible if you engage professionals who are
   experienced in fake ICO scam reversals and cryptocurrency forensics.
   
   
2. What should I do immediately after realizing that I have been scammed?
   
   For starters, you will want to keep a record of all communications, avoid further contact with the scammers, report this to the relevant authorities, and contact a crypto recovery company for help.
   
   
3. How do fake ICOs generally get investors ?
   
   They often do this through social media hype, influencer marketing, or by hiding behind technical documents that are contrived and promise unrealistic returns.
   
   
4. Are all new cryptocurrencies scams ?
   
   No. Numerous legitimate projects exist, but you cannot be too diligent in fully researching to ensure you can distinguish trustworthy projects from scams.
   
   
5. Are all recovery providers legitimate ?
   
   Some are; some are not. Always conduct thorough research on recovery firms. You can ask for reviews, check for transparency, check for reviews from verified clients and look for a viable professional presence.
   
   
6. Can you be scammed twice ?
   
   Yes. Fraudsters offer so termed "recovery scams" to victims of frauds, via victims lose money rather quickly. Only ever work with firms with records of proven success and avoid paying anything upfront until you can verify legitimacy.
   
   
7. How can I protect myself better in the future ?
   
   From a security perspective, you can enable multi-factor authentications, put your assets in wallets, never share your private keys, and only ever invest in a project that has been well audited and reviewed.