How to Avoid Scams

The cryptocurrency industry has been known to attract bad actors due to the early stage nature of the industry, promise of large potential gains, and lack of common security infrastructure across the board. How you choose to engage in the digital assets universe, be it a common exchange or new decentralized platform, there will be bad actors trying to manipulate you.

We generally suggest you follow your guy and the adage “if it sounds too good, it probably is.” Here are some things to look out for:

Be aware!

  • Promise of Outsized Returns: Many fake “traders” will attempt to reach you in Telegram chatrooms, email, etc. – 99.9999% of them will be trying to steal your money. Some of them lead with the fact they are professional “FX traders” moving into crypto or that they are selling Bitcoin at extreme discounts. Do not believe them, no matter how real they sound.
  • Read the Fine Print: Self explanatory, but reading the legal infrastructure that underpins your trading behavior is critical.
  • Phishing: This occurs when a bad actor contacts you (through whatever means) by posing as a legitimate actor to lure you into providing personal data such as usernames, passwords, bank account numbers, etc. In order to prevent loss of funds, always remember to check the security certificate of websites, email address (compare it with what you think the domain should be), check to see if the hyperlinks they provide match where you want to go, keep in formed about phishing techniques, keep your browser up to date, and use firewalls! Celebrity “endorsements” of crypto have been popular as well.
  • Pump and Dump: Recognizing the trading exchange you utilize is critical. Given the success of well to do names like E*Trade, Fidelity, etc., traders in the US just assume they are dealing with a good counterparty. Be aware of exchanges with little traction or name recognition, research exchanges to ensure they do not participate in ‘wash trading’, and use Reddit / Twitter to sanity check your chosen venue. The community is quick to call out scams, and, if you can’t find any info on the exchange, it’s probably a scam.
  • Ask the Community for Help: Bitcoiners are always willing to share their thoughts on a particular program. Posting on r/Bitcoin or tagging any of the Twitter handles we recommend you follow with a question should elicit a response. Also, feel free to reach out to us!

Here are some additional tips to protect your crypto1,2,3:

  • Use Cold Wallets when possible. Hot wallets should be used when you actively need quicker liquidity, but should not be the preferred storage mechanism for long term assets
  • Use 2FA. Text 2FA leaves you susceptible to Sim swaps, so try to use Google Authenticator or a similar service
  • Ensure Custodians provide indemnity to avoid fallout from negligence or failure to perform
  • Make sure your loved ones can access your crypto if something inexplicable happens to you
  • Divide your assets among multiple wallets.
  • Always backup your wallet.
  • Double check addresses when sending or requesting funds.
  • Avoid public WiFi when accessing your accounts (or just… in general)
  • Research paper or hardware wallets (only use if you are savvy, while secure, they are difficult to operate for a newbie)
  • Use difficult or randomized passwords (generators can be found on LastPass)
  • Do not brag about your holdings to others!

Footnotes

  1. https://woodruffsawyer.com/cyber-liability/10-best-practices-protecting-cryptocurrency-assets/
  2. https://cryptopotato.com/9-must-tips-securing-crypto-wallet/
  3. https://www.blockchain-council.org/blockchain/top-10-cryptocurrency-security-tips-for-2019/

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