How To Circumvent Common Cryptocurrency Scams

How To Circumvent Common Cryptocurrency Scams

How To Circumvent Common Cryptocurrency Scams

Unfortunately, with the popularity of cryptocurrency comes with it crypto shysters, scam artists, and other illegitimate promoters trying to get taxpayers to invest in cryptocurrency scams. These charlatans know that people want to make quick money without having to work for it. And, with so many people finding luck with investing in cryptocurrency at the right time, Taxpayers who are less knowledgeable about how the process works, may find themselves on the receiving end of a cryptocurrency scam. Unfortunately, since cryptocurrency is not regulated by the US government it does not receive the same protections that your bank account may receive such as FDIC protection. Let’s look at some of the more common types of cryptocurrency scams to avoid.

New and Unproven Coins

These days, it is very easy for taxpayers to get caught up in the wave of alleged easy money and especially through social media. Sure, you may have purchased Bitcoin several years ago and now hit it big, but that doesn’t mean every new cryptocurrency on the market is going to have the same impact — in fact, chances are it will not, and so it is important that you do your due diligence and research before investing money in new and unproven coins. This is somewhat similar to penny stocks — which get pumped before they are ultimately dumped by the brokerage.

White Papers are Lacking in Content and Substance

If you are found a new cryptocurrency that you might be interested in, it is important to thoroughly review information about the coins and the white papers, so that you can get an understanding of how this specific cryptocurrency distinguishes itself from other cryptocurrencies on the market. Refer back to paragraph one above when it comes to the hype surrounding new and unproven coins.

They Want You to Pay Before You Receive Your Crypto

If you are considering investing in cryptocurrency in which you are investing in the company but will not be receiving your coins up front, that is something you must be very cautious of. What prevents the company from going under and and taking your investment with them? In addition, since it is not backed by the US government, protections such as FDIC ‘Insurance’ do not apply.

Unsubstantiated Tax Withholding Required by the Company

This is a recent scam that has become very popular as of late. For example, a Taxpayer may invest a significant amount of money to acquire coins — and then the value of the coins goes up. But, when the taxpayer is ready to withdraw, the company requires that they withhold the potential taxes that are. While it could be legitimate, chances are there may be some illegitimate aspect of this type of withholding and you should be cautious if you find yourself in this type of situation. That is because if the company does not actually contribute that money for your taxes, you will still ultimately be responsible for any tax liabilities.

The Owner Has a History of False Prophecies

The only thing that feels worse than being scammed, is being scammed again by the same person or company twice. It is very simple for a company to go under only to reestablish itself under another name and with a fake owner representing the actual person who may be committing the scams. Thus, if you are investing in cryptocurrency that is unproven, you will want to consider all aspects of research to determine the legitimacy of the company.

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