trade crypto safely
One should trade crypto safely, a malicious undertaking in the cryptocurrency industry where the developer quits on their project and disappears with investors’ money is called a “rug pull”. Scams are common in every industry, so why would hackers miss the DeFi ecosystem? Usually, ill-intentioned individuals build a token and advertise it on DEXs (decentralised exchanges) before pairing it with a popular digital currency.
Unlike centralised cryptocurrency exchanges, DEXs enable individuals to offer tokens without audit and for free, leaving room for scams like rug pulls. And because creating tokens on open-source blockchains like Bitcoin and Ethereum is free and easy, fraudsters also take these two factors to their advantage.
Here’s an example of a rug pull: a coin skyrocketing in price within hours, driving FOMO, and gaining profits consequently.
To avoid unfortunate situations, many successful traders recommend checking the Ethereum price USD on popular CEXs (centralised exchanges) like Binance. And if you find it appealing and want to invest in some, the process is easy: you open up a free account on the app or website, choose the purchasing method you’re comfortable with, and store or trade your digital currencies.
Enough with definitions, and let’s move on to effective tips on how to avoid being scammed and some examples of the most incredible rug pulls in history.
How to spot cryptocurrency scams
Remember: when something sounds too good to be true, it probably is. Excessive marketing just doesn’t feel right sometimes. Every company promotes itself. However, heavy investments in marketing make you question whether it’s safe to take part in the project. Offline promotion, paid influencers, internet advertising, etc., are some tools that can advertise scams, as they can reach many individuals quickly and generate money.
If the marketing for a crypto product seems heavy-handed or makes extravagant promises without supporting evidence, you should do extra research.
Here are some signs that you may have stumbled upon a rug pull.
- Unnamed team member. Be wary if you can’t find out who’s running a digital currency. In most investment businesses, the owners have accessible biographies, are easy to find online, and are active on social media.
- A poor or non-existent whitepaper. The white paper is one of the most crucial aspects of an ICO (initial coin offering). It explains how the digital coin works and how it has been created. If it’s non-existent or doesn’t make sense, tread carefully.
- Guaranteed returns. No financial investment can guarantee an ROI. You should always see a red flag behind a cryptocurrency that promises future profits.
- Free wins. Like promises of guaranteed returns, you shouldn’t trust investment opportunities that promise free cryptocurrency or money.
How to stay away from cryptocurrency scams
One of the best pieces of advice for avoiding cryptocurrency traps is to protect your wallet. First things first, you need a crypto wallet with private keys. It might be a scam if a company asks to access your personal information to allow you to participate in an investment opportunity.
Secondly, a good rule of thumb for any investment is to take time and invest only in things you understand. Fraudsters often use high-pressure tactics to convince you to invest ASAP – for instance, by promising discounts or bonuses in return.
Here are other tips to protect yourself from crypto scams:
- Ignore cold calls
- Only download apps from official platforms
- Be wary of social media adverts.
Four famous cryptocurrency rug pulls
It’s worth reading about several popular crypto rug pulls, at least for the sake of knowledge. Many projects failed, but their creators gained fame for their attempts.
Swipathefox project
Swipathefox project, another well-known crypto scam, was initiated by Sacramento Kings star guard De’Aaron Fox. This was an NFT project that used the Ethereum blockchain to create no less than 6,000 distinct fox-like characters. The project also featured exclusive giveaways and offers, sparking a lot of interest.
The project was left behind, and the website shut down. Social media pages and discord also disappeared, just like the $1.5 million profit.
Following this occurrence, the player issued a half-hearted apology, claiming that he had abandoned the endeavour due to the NBA’s hectic schedule. Meanwhile, holders of the NFT were only compensated if their investments exceeded a particular threshold.
One coin
OneCoin was a Ponzi scam based on cryptocurrency and was created by a Bulgarian national who vanished in 2017. The entity raised no less than $4 billion.
OneLife Network Ltd. and OneCoin Ltd. (created by Ruja Ignatova) mainly focused on selling course materials and operated like a multi-level marketing scheme in which purchasers were compensated for recruiting new clients. However, the currency couldn’t be used to make payments and wasn’t traded actively.
The creator fled in 2017 when a warrant was issued for her arrest, handing over authority to her brother, who, two years later, pleaded guilty to money laundering and fraud.
Thode
Turkey investigated Fatih Faruk Ozer last year on suspicion of fraud and founding a criminal organisation. The founder of the cryptocurrency platform Thodex is now renowned and linked to one of the biggest crypto scams in history.
Before it went offline, this cryptocurrency’s trading volumes were stated to be in the billions of dollars. Even though the real figure isn’t that high, it’s still a significant amount. The platform claimed on its website that it had ceased operations due to a “partnership offer” and that service would be resumed in five working days.
Africrypt
The BTC pool of Africrypt disappeared in April 2021, and it was estimated at $3.6 billion. The two founders were brothers and stated that the platform had been attacked and funds were stolen. A week later, the app users lost access to the platform’s back end.
The founders denied any involvement in the malicious attempt. Yet, they disappeared a month later.
They’ve also said that the maximum sum they traded wasn’t $3.6 billion but $200 million.
All in all, to stay away from cryptocurrency rug pulls and scams, you just have to be careful and use common sense. Avoid using shady crypto exchanges, trusting any promise, and participating in projects that make you question their genuineness.
