4 Ways to Spot Cryptocurrency Scams

By cryptopenguin

This guide is sponsored by Prime XBT, the leading Bitcoin-based margin trading platform. All links to Prime XBT in this guide are referral links.

Cryptocurrencies have become the hot new investment, creating many new millionaires and leading to what some call the greatest transfer of our time.

Dazzled by promises of revolutionary new technology, many investors are finding themselves putting money in projects they do not fully understand. This has opened the door for scammers and charlatans looking to make a quick buck.

In this article, we will go over four ways to spot potential scam projects so you can manage your expectations and plan your investments properly.

1. Unrealistic Promises

If it sounds too good to be true, then it probably is. But when you have no understanding of the technology, how do you know what’s too good to be true?

As a rule of thumb, if there is a promise of guaranteed or overly high profits, you have a reason to be skeptical.

Bitconnect promised daily profits 

The now infamous Bitconnect promised users who locked funds in their lending scheme up to 40% monthly interest. This interest was supposedly generated from their trading bot, with no mention of limitations or possible drawdown periods.

If this bot was capable of generating such incredible returns with no restrictions to the amount of capital, why were they sharing it with the public?

Bitconnect’s referral payout structure

In reality, Bitconnect’s high payouts were only made possible by the promise of high profits, combined with the multi-level marketing structure. This drew new capital into the platform and, for a time, allowed Bitconnect to keep taking money from new people to pay those at the top.

Not all projects are such obvious scams however. Sometimes there is some vague promise of a new technology that sounds like it could be somewhat plausible. What can you do in such a case?

2. Lack of Proof

When looking at a project that promises some exciting new technology, search for signs that the technology that they promise exists. 

The Solidity repository on Ethereum’s Github shows signs of active development

Blockchain developers will often publish their code, either publicly or privately, on Github. Ideally, the project website should have a link to a public Github with many repositories that show heavy activity and well-crafted code.

If the technology in question is still in the planning stages, at the very least there should be a well-crafted white paper or technical explanation of the theory behind their new technology.

OneCoin claimed to work on a highly advanced ‘powerful blockchain’

OneCoin is another known scam that promised to provide “borderless, accessible and affordable financial services” for all using their revolutionary new blockchain.

There was, of course, no proof provided for these claims. No technical papers or links to any code repositories proving the existence of this blockchain.

In reality, the project had no blockchain at all. Developer Bjorn Bjercke has revealed in interviews that he was approached in 2016, two years after OneCoin was launched, to actually start building a real blockchain for them.

If the project cannot or will not provide any evidence to back up their grand claims, then your default position should be one of skepticism.

3. Anonymous or Fake Team

Whether it be for the sake of decentralization, legal issues, or safety, some teams choose to launch with anonymous teams. This follows the precedent set by Satoshi Nakomoto, the creator of Bitcoin, whose real identity remains unknown to this day.

While many legitimate projects have been launched in this way, keeping the team’s identity hidden makes it harder to check the credentials of each member to see if they are qualified. It also makes it very easy for the team to run away with any money they’ve raised or collected with little fear of repercussions.

Does this mean that it’s safe to invest if you see photos of the team on the website?

Not so fast!

Realistic profile pictures can easily be generated using AI technology (Source: https://generated.photos/)

With today’s technology, scammers can create countless AI-generated photos of realistic-looking people in just a few clicks (see screenshot above). Instead, try to look for video recordings of team members, which are harder to fake.

Finally, don’t let your guard down just because you see a name and a face. OneCoin CEO Dr. Ruja Ignatova often appeared to speak in person at live events. With a Master’s degree in economics, Ph.D. in Law, and experience working for consulting company McKinsey & Co, she seemed quite credible.

But even with these credentials, she still ended up scamming people all over the world for billions of dollars.

4. Overly Aggressive Marketing

Promotion is normal for new projects trying to get attention from investors and the general public. However, this usually needs to be balanced with other expenses, including coding, research, and development of actual products/technology that will lead to real utility and revenue.

Top 5 promoters receiving a million dollars in cars at the Bitconnect ceremony in 2017

For scam projects though, the real product is the flood of gullible new investors who will continue to keep pushing up token prices. With no intention to spend money on actual product development, the scammers are free to spend the majority of their budget on drawing in new investors. At the annual Bitconnect ceremony in 2017, a million dollars was spent on cars to give out as prizes for the top five referrers.

Even if the project were legitimate, spending millions of dollars on celebrity endorsements and flashy prizes is likely not the most efficient use of funds. Unless the team already has the best product and only needs to market it, that money would probably be better spent on hiring quality engineers or other key personnel.


Blockchain technology is an incredible innovation, but it cannot eliminate human greed. With greater amounts of money flooding into the space each day, more and more opportunists are looking to make a quick buck off of gullible and uninformed investors.

While the list provided above is by no means exhaustive, avoiding projects with unrealistic promises, no proof, anonymous teams, and overly aggressive marketing goes a long way towards protecting you from scam projects.

Want to increase your chances of spotting fake projects? Check out the recommended resources below to learn more about some of the biggest crypto scams so far. Once you understand how these scammers operate, you will be able to easily spot and avoid potentially dangerous crypto projects.

Recommended Resources

The Missing CryptoQueen (Podcast)
This podcast from the BBC follows the story of Dr Ruja Ignatova and the OneCoin scam

Plus Token (PLUS) Scam — Anatomy of a Ponzi
Boxmining goes into detail about the rise and fall of the multi-billion dollar Plus Token ponzi

How BitConnect Became Cryptocurrency’s Biggest Cautionary Tale

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