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FAQ

Crypto scams and frauds can take many forms. Familiarize yourself with some common terms, to help better protect you and your assets!

What is a Rug Pull?

A rug pull is a type of crypto scam that occurs when a team pumps their project’s token before disappearing with the funds, leaving their investors with a valueless asset.

There are three main types of rug pulls in crypto: liquidity stealing, limiting sell orders and dumping.

1.) Liquidity stealing occurs when token creators withdraw all the coins from the liquidity pool. Doing so removes all the value injected into the currency by investors, driving its price down to zero. These “liquidity pulls” usually happen in DeFi environments. A DeFi rug pull is the most common exit scam.

2.) Limiting sell orders is a subtle way for a malicious developer to defraud investors. In this situation, the developer codes the tokens so that they’re the only party that is able to sell them. 

3.) Dumping occurs when developers quickly sell off their own large supply of tokens. Doing so drives down the price of the coin and leaves remaining investors holding worthless tokens. “Dumping” usually occurs after heavy promotion on social media platforms. The resulting spike and sell-off are known as a Pump-and-Dump Scheme. 

What are Investment scams?

Investment scams involve a bad actor enticing people to send their cryptocurrency to the fraudster with promises of “huge gains.”

Scammers can play many parts, such as an “investment manager,” a celebrity, Influencer or even a love interest on an online dating site. Whatever role is assumed, they promise to grow your investment if you transfer your cryptocurrency to them.

If you follow through with their request, kiss goodbye to your crypto.

What is a Phishing scam?

Phishing scams are an old favorite among scammers. Fraudsters are aiming to access your account details, including your crypto keys. As any crypto user knows, he who holds the key holds all the crypto.

Phishing scammers often lure you into clicking on a link to a fake website, where they can then steal your account details. They can impersonate well-known companies, like Amazon or your bank, utility companies, or even government agencies, and may post links on social media or contact you directly.

For example, they might send you an email or text saying a withdrawal was initiated and give you a link to cancel the transaction.

What is a Man-in-the-middle attack?

When users log in to a cryptocurrency account in a public location, scammers can steal their private, sensitive information. A scammer can intercept any information sent over a public network, including passwords, cryptocurrency wallet keys and account information.

Anytime a user is logged in, a thief can gather this sensitive information by using the man-in-the-middle attack approach. This is done by intercepting Wi-Fi signals on trusted networks if they are in close proximity.

The best way to avoid these attacks is to block the man in the middle by using a virtual private network (VPN). The VPN encrypts all the data being transmitted, so thieves cannot access personal information and steal cryptocurrency.

What is a Ponzie Scheme?

Ponzi schemes pay older investors with the proceeds from new ones. To get fresh investors, cryptocurrency scammers will lure new investors with bitcoin. It's a scheme that runs in circles, since there are no legitimate investments; it is all about targeting new investors for money.

The main lure of a Ponzi scheme is the promise of huge profits with little risk. There are always risks with these investments, however, and there are no guaranteed returns.

How can you best avoid getting scammed?

Given the heightened risks with digital assets, prudence is essential. To avoid crypto scams, follow these tips:

  • Don’t respond to unsolicited contact. No matter who contacts you from your crypto brokerage—or any financial institution, for that matter— the best practice is not to respond. Look up the official number for the institution and initiate contact yourself.
  • Check before you click. Don’t open hyperlinks or attachments from unfamiliar senders.
  • Keep accounts separate. Don’t link crypto brokerage accounts and traditional bank accounts permanently.
  • Place a hold immediately if you receive notice of unusual activity on an account. Do not wait to place a hold on any future transactions based on fraud.
  • Use reputable companies. To ensure your information and crypto security, use a wallet from a reputable company. MetaMask as a reputable hot wallet or Ledger or Trezor as reputable cold wallets. There are many available, just make sure to do you research before choosing your Crypto wallet.
  • Look for HTTPS. HTTPS, as opposed to just HTTP, in a crypto exchange or wallet URL indicates the site has secured and encrypted traffic. NEVER connect to a website or exchange that itself is not secured.
  • Remember, if it sounds too good to be true, it most likely is.
  • Trust No One, Trust the Data!