What you need to know on crypto-currencies to avoid scams

Crypto-currencies are becoming increasingly popular and since the staggering rise of the Bitcoin, many investors rightfully wonder about the opportunities such an investment can represent. In an era of digitalisation, crypto-currencies attract attention and curiosity from both the average person with an interest in trading and scammers. So what do you need to know in order not to fall prey to what could potentially represent a new way to extort funds?

  1. Get informed — before you get into crypto-currencies, it is advised to research and understand the field. Just because it is gaining popularity and people are seeing return on investment, does not necessarily guarantee anything. The grass is not greener on the other side — it is greener where you water it i.e. the more time you spend on researching the topic, the more knowledgable you will be, the safer your investment will be qualitatively. Scammers feed of ignorance. Some risks of not knowing the field include : the risk to pay exorbitant (vaguely justified) fees, not having any visibility over the transactions, not knowing enough on the currencies one is dealing with, relying on unverified sources and having no say in the process. There are some exchanges that are verified, however even so, you need to do your research and find out what’s for you, whether it is Coinbase, Kraken, Bittrex or Cryptopia,… Take your time to determine what works best for you i.e. will you need an offline wallet?
  2. Beware of what you hear — some unscrupulous structures would want to get you to invest, solely based on the theory that the more investors inject funds, the more everyone has the chance to win and win big. This creates a false group effort, which often hides a selfish desire to extort the most money possible. It is also commonly referred to as a pyramid scheme and serves the purpose to create the hype/ a sensational effect that would divert the investors’ attention on what is really going on behind the scenes. As a rule of thumb, do not trust that which you do not understand and beware of extravagant promises on return.
  3. Always stay safe — if you are just getting started in the realm of crypto-currencies, do not rush. You can use a well-established reference such as Bitcoin as a starting point, as other new currencies create the risk of poor tracking and may escape the radar, as they do not get much exposure. This is the breeding ground for potential unscrupulous transactions, for the rules are set under circumstances neither you nor the general public have much control over.
  4. Beware of all things “shiny” — Always make sure that you do your research on the company you are dealing with (are they legally registered? how long have they been on the market? their history and press releases, their address and contacts). Indeed, some smaller structures would occasionally want to create hype and offer Initial Coins Offerings (ICOs), as a way to raise money. Have a reason why you would want to work with that particular startup, don’t rush into investment right away. Work on establishing a partnership.
  5. Do not buy a “cat in the bag” — this is a colloquial way of warning you not to rush into investment, until you have verified that the currency you are dealing with really exists. Beware of calls prompting you to invest in that ‘brand new opportunity, which is on the rise”. Make sure that  you establish how you are going to be best contacted and how long it will take you until you are sure that you want to work with one particular company, on one particular product. Browse through specialised websites and get as much information as you can in financial guides, like those in stores. If the currency is not mentioned anywhere, it is a clear indicator that it might not be real. If you need further guidance or you have fallen victim to a scammer, reach out to our legal team for further assistance.