Avoid scams in Crypto

Many have asked us how to avoid scams in Crypto (or fundraising in general)?

Investors see hundreds of pitch-decks every week, they all sound great.

All teams look wonderful.

But you can’t really trust them all.

Understanding the world of Crypto

Let’s first understand what crypto and blockchain really are:

Cryptocurrency is a type of decentralized currency which is traded Over-The-Counter (OTC) or via an exchange.

Contrary to common belief, not all crypto-coins function as replacements for real money (USD, Euro, etc.).

Crypto-coins mostly serve as a type of warrant.

They are exchanged for coins that are accepted out there, such as Bitcoin or Ethereum.

Blockchain is a type of security protocol, which safeguards users within a system.

It doesn’t necessarily have to issue any type of crypto-currency to become operational unless it’s part of a fundraising strategy.

Avoid scams in Crypto

After delving into the world of new fundraising last week, we will talk about the perils of fundraising and how to avoid scams in crypto.

We are not going to offer a “caveat emptor” type of warning.

The following is meant for the ones who are going to invest into STOs, ICOs, IEOs or traditional fundraisers in companies in this business.

As we mentioned prior, decentralization makes it difficult to track who is actually issuing what and how.

It also offers many other perils, in the form of scams such as no real product or service to offer, just an idea.

It means that an investor should be looking for:

  1.  A registered company
  2. Management team with a track record
  3. A well-written whitepaper 
  4. Private Placement Memoranda
  5. Subscription Agreements
  6. Well-written term sheets (when engaging with the company)

Not all are relevant for each and every type of investment, but this is your “cheat-sheet”.

Before accepting any kind of investment in a company, do some extra due diligence:

It’s all gone

Someone made a great system. It was so great that it wasn’t even great.

A known trend in the world of crypto is scamming in the form of breaching through security and stealing all the money.

Investors must protect their investments.

They must guarantee that their investment is insured somehow.

They don’t just put money without thinking, they do their due diligence.

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