Due to the booming cryptocurrency market, many genuine projects are being impersonated by scammers and hackers looking to take advantage of unsuspecting investors. Here, we take a look at some of the most common scams, and how to protect yourself against them.
Disclosure: Namahe, the Blockchain-based Supply Chain, has previously sponsored Hacker Noon.
1. Make sure you are on the right website
Phishing is becoming more common as scammers become increasingly sophisticated, and arm themselves with new tools to fool unsuspecting investors.
One of the major ways scammers are now targeting ICO investors is by cloning the official website. Often, these scammers will also purchase paid advertising on Google, and other search engines to increase their search ranking. As such, be sure to double check the URL when clicking through from a search engine or anywhere else.
It is most common for ICOs to use either a .com domain extension, or .io. Often, phisher websites will have a less common domain extension like .am or .agency. If in doubt, search for the ICO on a trusted ICO listing site, such as Coinschedule or ICOalert to find a link to the true website.
Once on the website, be sure to check the SSL certificate to make sure you are on the site is genuine. The genuine website should have a valid SSL certificate with no errors, for example;
Once you have found the genuine ICO website, we recommend bookmarking it, rather than navigating to the site via a search engine, this ensures you are clicking the correct URL.
2. Avoid scammers in the telegram community
Telegram groups/channels are increasingly being used by ICOs as a major community platform. However, this growth is also being targeted by scammers who take it upon themselves to prey on new and unsuspecting members in the community. If you think somebody might be trying to scam you, please bring this to the attention of the group admin, as they will usually work to warn the community and remove the scammer where possible. There are a few usual tactics employed by Telegram scammers, we’ll cover the most common here:
- Faking the entire project Group
Sometimes, scammers will attempt to copy the project group, creating a second group or channel which aims to imitate the original. Within these groups/channels the admins might offers discounts or bonuses which are attempts to scam the members.
Usually the official group (excluding those just starting out) will have several thousand members, and will be listed on the ICO website, for example;
- Impersonating an Admin
Perhaps the most common tactic used by telegram scammers is impersonating a group admin. To do this, scammers will typically create a very similar username to a group admin, and use the same profile photo and title text. However, these can be distinguished from true admins as they will not have the grey admin badge next to their posts, for example:
Often, these impersonators will DM users from the group and offer a discount, bonus or early-access to sales. Invariably, these lead to an attempted scam of some sort. Typically, genuine group admins will never DM users without announcing it in the main group first. Again, be sure to carefully check the username of any “admin” sending you a DM, note that sometimes the username can be similar if they use tricks such as substituting a lowercase ‘L’ with an uppercase ‘i’.
Rule of thumb — Admins will never ask you for money on Telegram. Do not accept any excuses, reasons or otherwise.
3. Keep your private keys Safe!
One common way scammers attempt to defraud investors is by gaining control of their private keys. Giving somebody your private keys is essentially giving them full control over your balance. Your private keys should remain exactly that… Private. Admins should never ask you for your private keys under any circumstances. If anybody asks you for your private keys you should be immediately suspicious.
4. Where to purchase ICO tokens;
Usually websites will not sell their tokens outside of their platform. Unless otherwise stated, it is rare for projects to partner with pools, exchanges or third parties to sell or distribute their tokens. Anything claiming otherwise is likely fake.
For example, Namahe only sells its tokens via its website — https://tokensale.namahe.io/
Please note, almost all ICOs require you to complete KYC and AML prior to taking part in the token sale. Often, scammers on forums, social media and elsewhere might offer you the chance to participate without completing these. These offers are almost certainly a scam. Most ICO dashboards will have a KYC section, similar to the one shown below:
KYC segment of the Namahe token sale dashboard
ICOs that require KYC/AML will not post their crowdsale address on social media, Youtube, Telegram or anywhere but the official website. The only way to access the crowdsale address is usually by completing KYC/AML in the dashboard. Do not send payments to any crowdsale addresses posted outside of official channels, these are likely to be fake.
General Warning Signs
Besides protecting yourself against thieves and scammers, you should also thoroughly research any ICO you intend to invest into. Here are several important points to check:
- Does the project make unrealistic promises? Typically scam projects will make wildly speculative claims about their project, or offer unrealistic guarantees about ROI.
- Is the project roadmap feasible? Building a successful project is not easy. You should be suspicious of projects claiming to solve long-standing problems without any evidence to back these claims.
- Is the team anonymous, or fake? This is a huge warning sign, and is probably the best indicator of a scam ICO.
- Most ICOs will use a smart contract to receive contributions and distribute tokens. Projects lacking a functional smart contract have a significantly higher chance of being fraudulent.
What to do if you suspect a scam
Besides those listed, there are potentially dozens of other types of scams, as well as novel scams invented every day. Be vigilant when participating in any token sale, and if in doubt, ask the crypto-community or the ICO support team.
If you have fallen victim to a scammer, or are suspicious of a potential scam in action, please do inform the ICO managers. Typically a good project will take measures to protect its members, including warning users, and describing how to safely participate in their token sale.
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