Frauds! FRAUDS! FRAUDS! Or how to avoid getting scammed

Frauds! FRAUDS! FRAUDS! Or how to avoid getting scammed

By bdrum | CURVED ANGLE | 3 May 2021


 

Hey! Finally got some nice CAKE gains to play around with? Wanna play around low cap projects to get that x10 you’ve been looking for the entire bullrun?

Good! But can you trust what you are buying?

We’ve all heard about other people losing money on projects that suddenly vanished, and this has only exponentially increased in the last months, as the bullrun attracts new investors that aren’t as shrewd as someone that has been around the crypto-world for a couple of years.

So today we’ll go down a list of data to check before putting your hard earned gains in someone else wallet

But first, what is a rugpull? Usually, in the crypto world, refers to the sudden lack of liquidity or buy support in the decentralized exchange of your choice. This usually brings a death spiral where buyers sold their tokens to save some capital. It’s helped by the lack of a central system (CEX, e.g. Binance or Kucoin) and the lack of a buy/sell book, resorting to an algorithmic equation to determine the swap  value.

Mind you, this isn’t really a fault of DEX, but having a massive flux of capital without any real way to prove a project's lasting legitimacy can be  an issue. 

So, having said that, you still want to invest in a project with no official DEX listing.

What do you need to  know? Here comes a proper checklist (in no order of importance) to help you out

 

HAS THE TOKEN ANY FUNDAMENTALS/ STAYING POWER?

Why are you investing in this particular token? What sets it apart from the rest? What value brings to the table? Does it fulfill a niche? Will it stay around even after a market correction?

A proper token should have a proper answer for all of those questions. DYOR on the documentation. The lack of whitepapers/yellow papers should always be a redflag.


% IN THE DEV WALLETS

“DEV burned/renounced the wallet: proof in the TG”

Yeah, sure. Photoshop is still a thing, and I’d rather look at what BSC or POOCoin has to say. If the devs have more than 40% of the tokens, STAY AWAY.

Same goes with whales, they’ll dump on you for fun.

 

CHECK EARLY WALLETS

Now, a good scam might still have the devs burning their wallets. But early on, they could have moved tokens to various wallets in a trickle-down system, hiding in plain sight their moves. This can create more controlled pumps and dumps down the line.

And they might have thrown a few tokens to random wallets too, to further hide their position. Check POOcoin for that, you might find some stuff you never bought there.

 

CHECK LIQUIDITY

Now, there’s a reason why locked liquidity is such a big sign of being reliable. It means devs are in for the risk and won’t take back their early investment at the first correction. Similarly, you’ll need a good amount of liquidity to conduct operations and avoid massive volatility. If the liquidity is e.g. 80 bucks, even 20 cents will create massive movements. While that might help increase the token value, you’d have a liquidity trap too, as no one can really sell unless he’s willing to damage every other investor. Rather than a mexican stand-off, you’ll have a death spiral.

 

CHECK THE CONTRACT ON BSCSCAN OR ETHSCAN

Again, don’t take at face value what the social media accounts say. DYOR, read the contract on BSC and find holes in it. Does it allow to switch owner? If so, be warned.

Can the owner suddenly pull the plug through liquidity? 

Always good to learn about this kind of details,as it can help you develop a better know-how.

 

DOXXED TEAM

Now, everybody likes anonymity and the safety connected to it, but would you give your money to someone with no track record or possible experience? Always check if the devs have some real names and thus have a harder way to exit-scam due to being exposed. It also gives more legitimacy as knowing what they are capable of, together with any experience in the crypto world, might make or break the token.

If you don’t know them and they vanish, good luck getting anything back.

 

SOCIAL MEDIA HANDLES

While I’m not a fan of social media and what they did to society, they still can be used as a tool to leverage and acquire data and information on various projects.

Do they have any sm handles? If not, you already have a redflag. How old is their twitter? Months, weeks, days? How do they engage their audience?

If they are just using it as a dashboard to shill pre-sales or hype up the project, I’d be wary. Same goes with comments. What you want is a solid and realistic conversation, a nice back and forth between adopters and the dev team. It shows a healthy environment with organic growth. 

If everybody just comments with stuff like  “very interesting project that I believe has a lot of merit to its work” or chock-full of rocket emojis and broken copy-paste english, I’d have some doubts. Oh and has soon as the TG and Twitter vanish, you know it’s over.

Cynical approach, I know, but better safe than sorry.

 

CHECK THEIR TELEGRAM

Is their tg just a front for their project or is there a serious discussion? Is criticism “allowed” (as it should always be) or it’s considered fud granting you a ban? Do people in there understand crypto or are they just screaming “HODL” and “ TO THE MOOOOOON” (that line makes me wish for some lovercraftian god to unleash its power on Earth).

And remember that a muted chat with bans is the biggest red flag around.

 

DON’T FALL FOR THE HODL MEME

You can hold on something only if it has a solid roadmap and a team, together with fundamentals. It has to have value and a niche not only to retail or dumb money, but to institutuional players as well. And a ton of coins on the bsc chain have a shorter market value than sour milk.

 

SET A REALISTIC PRICE EXPECTATION AND MOVE ON

Learn to let it go, get in and get out,without crazy expectations, as many low cap coins aren’t there to stay. You can still get money out of one of the many Ponzi’s schemes around, but you have to set a realistic gain target (e.g. x5 for a small cap at the beginning of the project) and get your money. You can also cover your positions and leave some gains exposed to see what happens, but be ready to lose them.

 

BE WARY OF PRE-SALES

Unless they are doing it on a known platform, why would you trust them? You are just sending money to a private wallet in an act of blind trust. You don’t do business like that IRL, why would you do it now? And sudden pre-sales with small windows of operations are a nice way to get your money and run while using the hype of a bull market, or to cover issues and further the scam for a while.

 

AIRDROPS WITH NO SET ENDING DATE

How often have you done the “dutiful” and tried airdrops that never delivered? Airdrops with the following+like and retweet procedure are just useful to get a bigger online presence and get free marketing, reaching a bigger audience to prey on. A proper airdrop won’t ask for that, and will set a finishing date as part of the roadmap planning.

A scam airdrop will only be used to further the outreach and push flash pre-sales, while never delivering as it would lead to a dump.

 

ROADMAP

If I do business with someone, and invest time and money into it, I need to know what they plan to do, their solutions to possible issues coming through and when they plan to deliver a product. I need checks and balances. 

Everyone can promise you the moon and be ambitious, but more often than not, when issues arise, the lack of planning and structure brings chaos and volatility, and only the talented few can ride that kind of wave. A good roadmap needs set dates, realistic targets and some openness on how to address challenges. 

Showing they can pull it off means that they can be reliable.

 

MARKETING

Do they have a budget for marketing or a plan? Word-of-mouth will not get you up there, and avoid any token asking for support through BNB/ETH donations. Nobody worth their salt will need help to find money to further their project, as it means they either don’t have the funds or they don’t want to risk their own in this.

 

ORIGINAL LOGO/NAME

Giving your idea a nice name and logo goes a long way. It creates a feel of something original and that will stand on its legs no matter what. It feels more personal.

On the other hand, DOGEMOOOONELON might do a x10 due to hype, but next week it will be floating dead on the river, while the new craze is DOGGODOGGOSIPSIP. 

Ask yourself: would you just name your product like the latest craze or make it somewhat original?

 

RUGPULL =/= DUMP

A sudden dump in price is not a rugpull, as it might be the result of bigger market corrections, devs not delivering, or whales taking profit. Don’t panic,assert your risks and understand if you can hold it through or not. Again, a project with inherent value will retain market presence and the chance of getting back to where it was. A scam will not.



Now, this is just meant to be a primer to help you out. I might have missed something, and feel free to write any info/opinion in the comments. People need to share data to make the crypto ecosystem grow even more and become more credible from a more “normie” POV. Every little thing helps, and I hope I did that with this piece.

 

Anyway, see you soon!

 

Binance referral (10%-10%)

https://www.binance.com/it/register?ref=TVTQM74X



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