What are scam projects

What are scam projects

Contents of this article:

Many crypto projects close down after barely a year on the market. Therefore, experienced investors are in no hurry to cooperate with new and little-known companies about which there is not enough information. Let’s talk about scam projects, tell you why companies become scams and cease to exist before they manage to hold out for several years.

What is scam?

Scam is the name given to projects that lose the trust of users and close without fulfilling their obligations to investors. This concept is associated with companies that violate the terms of cooperation in business, do not pay money to investors. If the project was called a scam, it means that it is doomed and will close soon.

There are a lot of scam projects in the cryptocurrency industry. Such companies, as a rule, grow rapidly, use effective marketing strategies to attract customers and investors, and then close after not even a year. They earn by attracting new people; in fact, a scam can be compared to a financial pyramid. If the classic network business earns by selling real goods and services, scam earnings are an investment.

Signs of scam

Scam projects have learned how to disguise themselves properly, and not every cryptocurrency investor or trader can recognize them. But there are a number of signs that are often found in scams:

  • Technical difficulites. Project owners do not spend money on site support, they ignore user requests.

  • Problems with payments. The project delays or does not pay money, sometimes it pays out selectively, to those who attract new investors.

  • Change of rules. The organizer can abruptly change the rules for withdrawing funds, as a result of which users will face difficulties when trying to exchange crypto for fiat currency. Additional verification which not every client can pass may appear.

  • Restart. The project cancels obligations to existing investors, tries to continue its work by recruiting new investors.

Important! One of the characteristic features of scam is the image of the victim. When the flow of investments stops, users face problems and demand an explanation from the developer, scam companies often try to present themselves as a victim, claim that the site has been hacked, the administrator’s account has been hacked, money has been stolen, payment systems and banks are failing.

How do projects become scams?

The beginning of the end for a project that will soon become a scam is the termination of investments and the outflow of investors’ money. Why is this happening:

  • Restriction of the target audience. When the project stops growing and no new investors invest in it, the organizers can only announce the closure or disappear without warning, deceiving customers.

  • Panic. When investors and users withdraw their money in a panic, the project goes under. Panic can be caused by objective circumstances, for example, worsening conditions for cooperation with a project or an economic crisis, or it can be artificially created by black PR from competitors.

  • Fast start. Marketing of scam projects is effective as long as new investors come. It develops rapidly when launched, after which it slows down sharply, the company’s debt to investors grows, and the influx of new investments is reduced to zero.

  • Hackers. A project can indeed become a scam as a result of a hacker attack. The company must take care of the security system and the reliability of transactions even at the start to prevent this from happening.

When a company realizes that it is sinking, serious problems begin, and the system is literally crumbling before our eyes. To protect your capital and avoid dubious projects, learn how to invest even before investing in digital assets. Approach the choice of investments responsibly; do not forget about portfolio diversification to protect your own funds. Take a course in Crypto Crew and become a member of our community!

We will teach you how to distinguish safe projects from scams, how to invest in crypto efficiently and profitably, how to earn on virtual assets in ways convenient for you without the risk of losing your deposit.