How to know that a crypto project is a scam

Important Takeaway

  • Investors who are new to cryptocurrency are more vulnerable to scams. Keeping up with the latest forms of fraud and manipulation is important to avoid financial loss.
  • Following a set of simple due diligence procedures helps users distinguish bad projects from legitimate ones.
  • Phemex, a well-established cryptocurrency exchange, periodically reviews its listed assets to ensure that users are protected from scams or checkout scams.

The crypto industry is known for continuous innovation. Projects come up with different ways to solve real problems. These solutions often reach a level of complexity that can be confusing for the average user.

Don’t stay in the bag

Fraudsters also devise more sophisticated schemes to take advantage of the less experienced, from traditional price gouging to bugging apps that manage and store digital assets.

In crypto, the classic method of deceiving users is what is commonly known as “rug pulling,” a scheme whereby fraudsters create and aggressively market new currency, relying on false or exaggerated claims.

The goal is to increase the price of the token by promising easy profits. Scammers are keen to generate fake trading volume over a certain period of time and give the impression that the project is sustainable in the long term (which is a factor Distinguish carpets from “pump and vacuum.”“)

When the project is big enough, the “team”, which is usually the biggest cash holder, leads the masses by selling everything, making huge profits, leaving investors with worthless tokens.

Here is a list of things that indicate that the project may be a scam or a potential scam, in an effort to promote a totally worthless code:


The white paper explains the purpose of the project technology. Users should be skeptical about the white paper that only indicates what will drive the price of the token up rather than explaining the code, economics, business model, and other important aspects of the project.

Serious projects tend to have comprehensive white papers and research that justify their purpose.

the team

There are some classic red flags about the project team’s identity, professional background, and relationships.

It’s a good sign if the team is a criminal. Douxing It is when project team members publicly disclose personally identifiable information about themselves, which contributes to the project’s overall credibility.

Be wary of early partnership announcements. Especially if the project has not been going on for that long. Build a strong reputation with companies like venture capital firms, media or great exchange It takes time and effort.

questionable recommendations Or a celebrity “shilling” can also help make the project seem more important than it is. Remember, the fraudster’s goal is to increase the sense of the project’s importance, which then translates into positive price action, which then creates a “fear of missing out” (FOMO) in their potential victims.

road map

A roadmap is a presentation or diagram that explains the protocol’s plan for technology deployment. A bit like an oversimplified version of the white paper that summarizes the project’s long-term strategy. The roadmap also includes relevant past achievements. If the flight plan is unrealistic or non-existent, it is likely an exit scam.


Check the lists of tokens. If it is traded on very few exchanges, centralized and/or decentralized, there is a good chance that it is a scam.

Knowing how much liquidity is behind the token is equally important. In DeFi as in traditional finance, liquidity is the total value of assets available for trading in a particular market or pool. Low liquidity usually means that a cryptocurrency project is in its infancy – or of little use.

DEXT . Tool It is a great site for discovering the liquidity of decentralized exchange trading pools. Users can filter their token search by blockchain and exchange. While it will detect the volume of transactions and the number of active addresses interacting with the project’s smart contract, it will also provide speculators with valuable information.

Website and Social Media

A bad website that looks like it was built from a template and looks unprofessional is a bad sign. Useful advice is to search for domain on Which is. Some jurisdictions are widely known for hosting fraudulent websites.

If the site looks good at first glance, valuable information will be discovered by reviewing external links to sites with content related to the project, such as a blog. Broken links or bad and outdated external content can tell you how much the team cares about the long-term plans of the project.

Fake references such as noting that the project included relevant content on sites like Crypto Briefing, Yahoo Finance or CNBC when not is certainly not a good sign. False or exaggerated statements and testimonies should also raise suspicion.

If users complain on social media about an incorrect side of the token or protocol and the team is unresponsive or vague about the claims, stay away from this project. Reading forums like Reddit or Twitter is a great way to discover the general feeling of the project community.

Crypto brought many early investors lucrative profits, which led many others to make false predictions and fall prey to scammers promising the next 10x. Due diligence and careful research is essential if you want to avoid losing your assets to pulling the rug. It’s not always easy to spot the latest form of fraud, especially in the ever-innovating industry.

Did you find your next 10x 10x? Why not buy it from Phemex? with more than 298 Token pairs available for trading Phemex conducts periodic in-depth reviews of each listed asset to ensure that they meet a high standard. When coin It no longer meets this standard, or industry changes, it is possible that Phemex will remove the token in one step to protect its users. Phemex is a platform that provides great liquidity, and enables users to trade effortlessly.

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