Scammers are increasingly using disguise as cryptocurrency projects to seize users ‘ funds. We name the key factors by which such schemes can be identified

In the first half of 2021, the Central Bank identified 146 financial pyramids, and the number of victims of Finico alone exceeded one million people. At the same time, we do not know about all the victims of fraudsters.

There is an opinion that the fascination with pyramids is peculiar only to residents of the post-Soviet space, and Americans who study finance from school are more resistant to the tricks of scammers. However, things are no better in the United States — losses amount to $3.25 billion only for the quiet pre-crisis year 2019.

Now financial pyramids are increasingly masquerading as cryptocurrency projects, but there are key differences that allow you to identify a fraudulent scheme. We have prepared a checklist, a question on even one item of which will become a red flag.

The pyramid does not have a free market for trading its “candy wrappers”. Study on which exchanges the token that is offered to you is traded. It is desirable that there are many exchanges and among them there are well-known large sites. If the entire infrastructure of the project is concentrated on one site that exchanges “candy wrappers” – this is a very bad sign. What will happen when this site is closed?

Pyramids always have problems with liquidity. Even if the token is present on several exchanges, check what is happening in the exchange glass and view the history of transactions for a pair with the token of interest. There should be a lot of transactions, and the exchange glass should have offers both for the sale and for the purchase of an asset. If the token that you bought is traded on dozens of exchanges on large volumes, as well as on many Automated Market Making services and swaps, this is a good sign. Even if some resource from the list is closed for some reason, you will still have access to liquidity on all other resources.

A real crypto project will have not only its own desktop wallets and browser extensions, but also support for developers of many third-party wallets and mobile applications. At the same time, the pyramids do not have their own software.

The pyramid does not have an active community. All messages on the forums and telegram channels of the project are exclusively of an enticing nature. There is no diversity of opinions and no dialogue between the participants. Messages with specific questions or doubts are deleted or receive template answers.

The central condition for participation in the pyramid is the drive of referrals and acquaintances. Cryptocurrency projects or exchanges can also offer various bonuses for registering with your referral links, but they will be quite modest, and their use is optional.

The pyramid offers huge annual percentages of profit. Real cryptocurrency projects never offer fixed fabulous percentages of profit. The success of your investment will depend on the market situation for the asset that you bought. The exception to this rule will be the liquidity provision tokens (LP tokens) on decentralized financial platforms (DeFi). Indeed, the profit of the owners of a share in the liquidity pool in pairs with medium-sized tokens can be hundreds of percent per annum, which are directly related to commissions from trading within a pair of other market participants. However, in DeFi, not everything is so cloudless. Features of use and security on such services are a separate big topic for a full-fledged article.

Pyramid “wrappers” have no functionality. Tokens of real projects can have many functions-from giving holders the opportunity to vote on project development issues to using them as an internal currency in a computer game or video hosting service.

Last but not least, you should pay attention to where the information about a potential investment came from. This is a subjective criterion, however, unlike other points where it will take time to study the asset, this point will help you quickly mark the information as potentially dangerous for yourself. On which website did you read the information about the project? If this resource has a long history and a good reputation, the probability of getting into the pyramid is less. Every well-known source tries to take care of its reputation and the fact of mentioning the pyramid can seriously damage the image. Another thing is if the ad came in the form of spam from a newly created Telegram channel, which may cease to exist in a week.

The above applies to people as well. Does your friend recommend you to invest somewhere? It’s time to ask questions: why does he need this, what is the history of his own investments in the past, with what emotion does he send his message? A real expert with extensive experience in investing in securities or cryptocurrencies will definitely mention the risks of any investments and recommend using only a small amount of your total portfolio for a new project. On the contrary, a fraudster, or a person led by scammers, will be overly optimistic, he will rush you and recommend you to invest as much as possible, which goes against the generally recognized rules of investing and managing funds.

Using this checklist will help you reduce the risks of being involved in pyramids or other fraudulent schemes of the cryptocurrency world. However, remember that the creators of the pyramids never stand still, constantly masking their schemes more carefully. The final decision about buying a particular tool is always up to you, make a decision only when you have studied the tool yourself, using all the methods available to you.

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