How to Spot Cryptocurrency Scams

Just like the dot-com bubble, there is fraudulent behavior. Some of these scammers are hoping to take advantage of the hype in the industry.

Here are a few things to look out for to make sure you don’t get caught up in a cryptocurrency scam.

Red Flag No. 1: Who Is Backing the Project?

Before you invest in any cryptocurrency, ask yourself, “Who is behind the project?” Do they have any experience with blockchain technology and cryptocurrencies or digital assets? Are there any reputable advisors on the team?

Here’s an example…

Recently, a company called AriseBank hosted an ICO. An ICO is similar to an IPO. Except, instead of receiving stock in a company, investors get digital tokens associated with a blockchain company.

But a simple Google search would have revealed that one of the principals, Jared Rice, is a well-known fraudster. That’s an obvious red flag for me. I always review the backgrounds of key executives and advisors as a step in analyzing any ICO.

Red Flag No. 2: Beware of Celebrity Promoters

While not fraudulent or illegal, using a celebrity’s reputation to promote an investment opportunity is also a huge red flag for me.

In the case of AriseBank, world boxing champion Evander Holyfield was associated with it and was supportive of the ICO. Any time I see a celebrity endorsement, particularly those coming from individuals who have no understanding of the technology and business, it is an immediate indication that something isn’t quite right.

The best blockchain projects would never associate with a celebrity. They just don’t need to pursue those kinds of marketing tactics… The projects’ merits should speak for themselves.

Red Flag No. 3: Does the Project Have Community Backing?

A successful blockchain company isn’t created in a vacuum. It requires communication, cooperation, and participation with developers and the cryptocurrency community at large.

To use AriseBank as an example once more, there was no community built around the project. I couldn’t find any teams in the community that were working on its technology or partnerships.

To make matters worse, there were no regulatory filings associated with the company. And this is a financial institution claiming to have acquired a 100-year-old bank… There must be filings.

As you may have guessed, AriseBank is precisely the type of investment I would recommend you avoid at all costs.

And it will come as no surprise to learn that the Securities and Exchange Commission (SEC) has frozen the company’s cryptocurrency assets and considers the ICO a fraud.

Anybody who took part in the ICO without doing due diligence has lost all their investment…