How to recognize a fraudulent crypto project

In this article, we invite you to familiarize yourself with a checklist of factors that will help you recognize a fraudulent crypto project, reduce risks and protect your finances.
The world of cryptocurrencies presents unique investment opportunities, but there are also dangers associated with them. One of them is fraudulent projects that promise unprecedented profits, but actually leave investors with empty pockets.

At AML Crypto we regularly encounter a variety of fraud schemes - from the simplest to the most cunning and sophisticated. Fake exchangers, phishing sites clones of well-known projects, promises of many “X’s” from investment "guru" and many others.

In this article, we offer you a checklist of factors that will help you recognize a fraudulent project, reduce risks and protect your finances. These tips will help you stay vigilant and avoid losses from scammers.
In this article, we invite you to familiarize yourself with a checklist of factors that will help you recognize a fraudulent crypto project. These points are only our recommendations based on our extensive experience. Sometimes scammers’ projects are so well thought out that they will pass these points, while honest and large projects may fail some of them.
Road map
Road Map of a crypto project is a document that describes the main stages of the project’s development, its goals and objectives. It should be clear and structured so that investors can understand how the project will develop in the future.
Most serious projects have their own roadmap, but not all publish it in the public domain. Meanwhile, the presence of this document is already good, but it is important to read it carefully.

Road Map must contain specific goals and deadlines for achieving them, be realistic, clear and structured. If project goals and timelines are too vague, unrealistic, or outdated, then this is a bad sign.

It is also important to check whether the project delivers on its promises. Just see if the project has delivered on its roadmap promises before your review date. If promises are not kept, this is a reason to be wary.

Solana project roadmap. Deadlines and clear goals are indicated. Promises kept.

A roadmap is the vision of the future project by its creators. A serious company cannot treat such a document irresponsibly.
White paper quality
White paper (a document describing a project) is an important document for any crypto project. It should contain detailed information about the project, its goals, team, technology and other aspects.
A foundational document such as a White paper should be written in clear language, contain comprehensive information about the project and answer questions such as:
What is the goal of the project?
What problems does it solve?
What technical solutions are used?
Who is the project team?
What is the project roadmap?
A sign of a fraudulent project can be the presence of the following signs in the text of the document:
Incomprehensible language, many technical terms that are not explained.
Incomplete information, lack of answers to important questions.
Unrealistic promises, for example, quick and easy money.

White paper of the Uniswap protocol is a good example: a detailed and understandable document, contacts of those responsible, updating the document.

Of course, analysis of the white paper is not a guarantee that the project is not fraudulent. However, it can help the user reduce the risks of investing in a dubious project.

If the document looks more like this, you should be wary.

Tokenomics is a set of economic aspects of a crypto project related to the issuance and use of tokens.
Tokenomics must be fair and transparent. It must take into account the interests of all project participants, including the team, investors and users. In this case, the chance that attackers are at the helm is reduced.

Bad factors that indicate the team’s intentions are not pure can be considered the following tokenomics points:
Unreasonable distribution of tokens - most of the tokens belong to the team or early investors.
Too fast distribution of tokens - the team and early investors receive tokens faster than in 1 year. Serious projects make plans at least several years in advance.
Unrealistic promises - the project promises too high profits or too rapid growth in the value of tokens.
Lack of collateral - tokens are not backed by real assets or services. This is not a mandatory condition, but the presence of collateral is often an important factor for the stability of the token, and therefore the reliability of the entire project.

Distribution of tokens from the tokenomics of the 1inch project: gradual, proportionate and over 4 years. You can see the full version of the tokenomics of this project on the official website.

Contacts, legal entity, legally significant documents.
These characteristics are usually characteristic of those companies and projects that are not hiding, and therefore have honest intentions.

If such data is open, not hidden and available to a wide audience, then this is definitely a plus in the “not a fraudster” box for the subject you are checking.
The website of the company or exchanger indicates various communication channels, be it email, links to social networks, accounts in instant messengers, links to portals for publications where there are articles and activity.

A private trader or mentor for making money on cryptocurrencies, in addition to the landing page, indicates his phone number, non-empty social networks, links to confirm his experience or achievements. All this can be a sign of openness and lack of need for anonymization, which is good for us as investors.
If the project does not hide the details, then this is an extremely good sign and the chances of running into scammers are quite small.
BUT it is important to check that this data is not fraudulent. Conduct a simple research on the Internet or on special websites for checking legal entities. Compare the data you found and that indicated by the project, look at the specified activities of the legal entity, its duration of existence, participation in trials and other available data.

A good example is the Circle company, which owns the USDC token: the legal entity is listed on the official website, all names are the same

Legally significant documents
These points mean a number of documents on the basis of which the company’s activities are carried out - public offer, privacy policy, user agreement, etc.

Yes, that’s right, those documents that we all try to quickly skip and not read are often guarantors of reliability. That is why we do not recommend skipping them when it comes to your funds. We understand that sometimes it is difficult to force yourself to read such canvases of boring and complex text, but we strongly recommend doing so!

What is inherent in fraudulent projects in terms of legally significant documents:
Lack of such.
If there are no such documents at all, then this is a dangerous precedent. Any serious and honest company protects its rights and the rights of its clients in this way.
Lack of legal entity and contacts in the documents.
Fraudsters are also no fools and often add templates for such documents, but do not indicate details or contacts in them, and this is a mandatory condition.
Simple and template text.
If, while reading, you get the impression that the text is formulaic and could be equally suitable for a crypto exchange and an online grocery delivery service, then you should think twice about it. Fraudsters often take the first text they come across that might suit them.

Legal documents page of the ByBit exchange.

Checking available data
Any entity with whom you want to contact has known data on the blockchain - be it an exchanger’s website or the telegram account of a girl you recently met and who “very successfully” trades crypto using the “” exchange.

A simple research in the form of an Internet search using available data seems too simple a method, but sometimes it is the most effective. Let's briefly look at the main examples:

Project domain.

Victims of crypto scammers have contacted us many times, explaining that they invested funds or used the service, so to speak, “” and suddenly lost their investments. In about a third of the cases when we typed the desired domain into search engines, there were sites with negative reviews about cases of fraud, “scam” tags and requests for help from other victims.

An equally common problem is a fraudulent site that is a clone of well-known projects. Often these are phishing sites created for the purpose of deceiving and taking away funds under the guise of well-known companies. The famous crypto wallet simply and elegantly turns from Metamask into Metamaks
Crypto addresses.

If a crypto address is available to you, then you need to perform an AML check on this crypto address. Some attackers, like ordinary users, think that their crypto wallets cannot be verified, but this is not the case.

For example, in our AML cryptocurrency address verification service you can do this with one click and in just a few seconds.
If you do not have full trust in your counterparty in the blockchain and you are risking your money, then such checks of crypto wallets are a mandatory practice.

Phone numbers.

If a phone number is available to you, then it is worth checking it through an Internet search, in the bank client, and in connection with instant messengers. If the data differs from those provided to you by the subject of the audit, then this is a clear sign of fraudulent activity and you should not contact him.

Mention in media and regulators.

It is not uncommon for large fraudulent projects to have already appeared on the radar of the media, law enforcement agencies and regulators, but still manage to fraudulently take funds from their victims.

Even if you know the legal entity of the company or their name is somewhat popular, it is worth checking the news background.
Activity in social networks and community
Checking social networks and the project community is an important part of identifying fraudulent crypto projects; they are usually monitored and processed by the project team and their representatives.

They answer questions from participants, provide information about the development of the project and its current status, and also hold events and competitions to attract attention. The team can also interact with various famous and popular personalities in the crypto sphere to promote the project.

The NEAR Protocol team is participating in an active discussion under their posts on Twitter...that is, X...well, you get the idea. By the way, subscribe to our account.

Anyone can conduct an analysis of activity and community without special skills. It is worth paying attention to the following aspects:
Activity and regularity of updates: If the project pages are not updated regularly and there is no news about development, this should raise suspicions. Fraudsters don't often waste time on this.
Content quality: Look at the quality and usefulness of the content that the project provides on its social networks. Robust projects tend to share information about their team, technology, development, and partnerships. The content of attackers is often superficial, unprofessional, or poorly related to the essence of the project.
Feedback and answers to questions: Pay attention to how actively and effectively the project team answers questions from participants in the comments. Reliable projects strive to provide information and quickly solve participants' problems.
Monitoring reviews and comments: If a lot of people express concerns or complaints on the project pages and they cannot be resolved or are left unanswered, then this may be a signal of problems.
Events and Competitions: Reputable projects can host various events, AMA sessions or competitions to engage participants. They announce such events in advance and provide clear rules and prizes.
Fake accounts and bots: Beware of projects that have a lot of fake accounts and bots on social networks. This may be a sign of an attempt to artificially increase the popularity of the project.
Sources of information: Check on which platforms and resources the project provides information. Official websites, social media pages, and verified cryptocurrency forums are generally considered more reliable sources.
Separately worth mentioning about GitHub.

GitHub is a popular online repository that provides tools for developers to manage and track changes to source code, and to collaborate on projects.

Essentially, this service is a place where a project shares its innermost solution code. Therefore, determining whether a crypto project on GitHub is a scam or not can be a difficult task, but extremely effective.

The Polygon project's GitHub page is a good example.

Here are some aspects, after analyzing which we can draw a conclusion about the intentions of the project:
Explore the project repository: Check how active the project repository is - constant updates are a good sign. If the repository is abandoned and has not been maintained for a long time, you should be wary.
Check the documentation and project description: honest projects usually provide a clear and detailed description of their goals, technologies and team, as well as detailed documentation on the use and configuration of the project.
Development teams, its anonymity and experience
The team plays one of the decisive roles in determining the reliability of a crypto project. After all, it is the people behind the project who determine its goals, strategy and quality of execution. It is important to remember that scammers often hide their true identity or provide limited information about team members.

Please pay attention to the following points:
Team anonymity:
The very fact of the team's anonymity is a bad sign! If the official website or documentation lacks information about team members, their names, photos and social media profiles, this may raise doubts. Reliable projects usually take pride in their team and provide detailed information about its composition.
Suspicious experience or its complete absence:
If team members have no previous work or experience related to blockchain or cryptocurrencies, this may be a signal that the project is either underdeveloped or potentially fraudulent. The lack of information about the experience is an even more alarming fact.
Public profiles and social networks:
Check team members' social media and professional networking profiles. Having authentic, active profiles with detailed information and connections can confirm the team's identity and legitimacy. Anonymous or sketchy profiles should raise suspicions.

Circle's key employees are highlighted on the official website. For each there is a separate page with BIO and several links to social networks.

An important point about the anonymity of the team! There are exceptions when the anonymity of the team is not a whim, but a necessity. This case is representatives of companies from the field of cybersecurity and the fight against fraudulent activities, the representatives of which include us at AML Crypto!
We can't be called special agents who need cover. But a certain anonymity of personal data, as well as personal safety, is extremely important for a number of reasons related to the nature of our activities.
Availability of smart contract audit from a well-known company
Having a crypto project or its smart contracts audited by reputable audit firms is a reliable way to confirm legitimacy. Experienced auditors, such as CertiK, Quantstamp, Hacken, etc. checks the security and code of the project.

Projects that successfully passed the audit demonstrate their honesty and concern for user safety. Projects that fail or refuse an audit may raise suspicions.

But don’t forget to read the text of the audit itself. Often in these documents, auditors highlight the weaknesses of the project. And sometimes cunning scammers hide an empty or fake document behind a link about undergoing a reputable audit, relying on our dislike of lengthy texts.

Some examples of Hacken audits.

Guarantees of success and earnings, flashy headlines
One of the most noticeable signs of scam crypto projects is their promises of “guaranteed success” and flashy headlines.

Fraudsters usually use bright and seemingly too good offers, promising thousands of percent of profits or instant enrichment. Remember that blockchain technology is still a high-risk area, and there is no guaranteed success in any investment, and such promises can be a trap.

Be suspicious of projects that promise "millions in a week" and offer something that sounds too good to be true. Reliable crypto projects usually provide realistic and balanced assessments of potential and risk.

The promises of the notorious “X” in our time are in themselves a reason to be wary.

Isn't it a familiar style?!

It is important to always remember that in the world of finance, be it classical or cryptocurrency, there is always risk. No checklist can guarantee 100% protection against fraud. You should always be attentive, cautious and willing to do your own research. Check all the data you have and look for additional ones.

Your security and financial success depend on your decisions and actions. Remember that if something seems too good to be true, it probably is. Conduct your own research, check the team and reputation of the project, and trust only verified and reliable sources of information.

You can always check cryptocurrency addresses using our solution. And if you still suffered from the actions of attackers, then contact our specialists - we will help you find the scammers and return your funds.
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