How To Tell If A Cryptocurrency Or DeFi Platform Is A Scam





Subscribe to our newsletter

By subscribing, you agree with Revue’s Terms of Service and Privacy Policy and understand that The Bitcoin Consultancy will receive your email address.

The Bitcoin Consultancy
How To Tell If A Cryptocurrency Or DeFi Platform Is A Scam
By David Veksler • Issue #15 • View online
My survey of 2500+ crypto scam victims identified some key signs that a crypto project is a scam. Whether it’s a scam from the start, or just doomed to fail and waste all your money, here are six ways to tell if a crypto project is a scam:

Is this crypto a scam? Five questions to ask:
1: Does this project have a legitimate profit model?
There are a few legitimate ways to make a profit in crypto, such as mining, lending, staking, and yield farming. Learn what each means to so can evaluate if an opportunity is legitimate. Never invest money in projects whose business model is not disclosed or that you do not understand.
Legitimate CeFi platforms clearly state what they do with customer funds, list their fee schedule, and expected returns. DeFi platforms should list token allocation, a link to the whitepaper, and smart contract source code. Never invest in Defi projects without a whitepaper or documentation stating the tokenomics.
2: Is this project feasible and sustainable?
Even if a project is legitimate, it needs to have a business model that is scalable and sustainable. For example, many projects aim to create coins for very narrow niches, like a token to pay your dentist. Such a project will never achieve a very large market cap. It’s also not sustainable because the token doesn’t add any value to its target market, and so it will never pay off for investors.
3: Does this project have independent verification or third-party certification?
Be extremely careful about platforms that offer to trade your money. There are only a few legitimate ways for businesses to trade customers’ money. In the US, they must be either a hedge fund or registered brokerage. They will be licensed with a regulatory body such as FINRA & SIPC or the SEC (via FORM D filings). Be aware that scammers are impersonating licensed financial professionals, so it is necessary to independently verify their contact information via FINRA BrokerCheck, LinkedIn, etc.
Note that hedge funds are not even legally allowed to directly advertise their services, so if someone is messaging you via Instagram and asking for deposits in anonymous crypto payments, it is 100% a scam.
In DeFi, services like RugDoc rate the legitimacy of financial platforms. RugDoc will tell you if a project has passed independent security audits like Certik. Never invest in a DeFi project without a security audit, or if rated as high risk by RugDoc.
4:  Can you independently verify this token or platform?
A common scam in crypto is to impersonate a legitimate platform or token. To avoid this scam:
1: Always access crypto services through their official website and never trust “support” links found through search engines or social media.  Scammers are placing search ads that fool you into thinking their fake website is a legitimate platform.
2: Be very careful of social media recommendations. Always check independent sources like RugDoc (for DEFI) or FINRA (for CeFi)
3: If buying a token, confirm the contract ID matches at CoinMarketCap.
5: Is this project run by a reputable team?
Many DeFi projects are anonymous, but CeFi projects should always disclose their management team. Always check that the bio on the project page matches what you can find on LinkedIn and Twitter.
Launching a cryptocurrency exchange is an incredibly technical endeavor. Does the management team have the required technical experience or are they just paid celebrities? Do not simply look at the number of Twitter followers they have, as that is easy to buy.
Conclusion: Signs of a crypto scam: 
According to my survey of 2500+ scam victims, fraudulent schemes have a few things in common: unrealistic returns, high-pressure tactics, sales pitches via messaging platforms, no mention of fees, & lack of reputation.
Scammers have deployed thousands of bots on social media platforms like Instagram, Facebook, LinkedIn, Telegram, and Twitter to push their platforms or pump up their tokens. Never trust social media recommendations, even from a friend, as scammers are hacking profiles to push their scams. Check to see if a project has a legitimate community on Reddit or Discord.
What is the current inflation rate?
Inflation is never uniform. Inflation is an increase in the money supply, but the government does not simply hand out cash to everyone. Most of the new money created by the Fed takes the form of low-interest loans handed to corporations, mortgage-backed securities, and government programs, in that order. The increase in prices thus flows from the assets being inflated, and eventually, down to everything else.
What’s your inflation rate? That depends on what you spend your money on. If most of your spending is on consumer goods, the inflation you experience will somewhat track the CPI. But if your money goes towards real estate, securities, or home/auto/student debt, you will have a very different experience.
Because politicians have very strong incentives to keep the official inflation index low, they manipulate the CPI formula to exclude the primary assets they are inflating. This is a temporary reprieve, but it still makes a big difference.
Whereas the official CPI is 6.8%, home prices grew 19.5%, and rents increased about 20%. The CPI is supposed to include housing costs with “Owners’ Equivalent Rent, ” but that only increased 3.5% in 2021. If we swap out the fake OER with the correct number of 20%, the CPI is 12.1% (.6*.068+.4*.2). The CPI excludes securities, but the S&P was up about 27% last year. I spend about 50% of my income on securities, so my inflation rate was 19.6% (.121*.5+.27*.5) in 2021.
The real evil of inflation is not the increase in prices, but the destruction caused by central planning of the capital markets. Any business that earns a steady and honest profit is worth a lot less since the present value of its future earnings is much lower.
A speculative, high-risk gamble that presently makes no money but could pay off big in the future is worth a lot more since inflation makes those future dollars are worth a lot more than current dollars.
This means that companies that are producing value for people today will find it very difficult to raise money to expand production, while speculative ventures can get all the money they want with inflation-supported loans.
This perverse incentive leads to malinvestment in the economy that causes business cycles. It also leads to high prices and shortages, since capital is redirected from value industries (making goods today) to growth industries (might make goods in the future). This is why Big Tech is worth so much: most of its revenue potential is still in the future.
Inevitably, politicians will try to stop the higher costs they created with price controls, leading to consumer shortages across the entire economy. The politicians will again blame capitalists for the problems they created.
David Veksler ₿🔑👌
In 1973's Soylent Green, the world is dying from overpopulation and resource exhaustion.

1973 population: 3.9 billion.
2021 population: 7.9 billion.

1973 per capita GDP: $971 (in current dollars).
2021 GDP: $10,926
The global poverty rate is down from 60% to 9.6%
Did you enjoy this issue?
David Veksler

The Bitcoin Consultancy (Formerly
A weekly newsletter about the history, finance, and technology behind Bitcoin.

In order to unsubscribe, click here.
If you were forwarded this newsletter and you like it, you can subscribe here.
Powered by Revue