Analise smart-contract

How to recognize scam and not lose money?

In the world of cryptocurrencies, DeFi, and decentralized exchanges (DEX), unfortunately, scam projects are found at every turn, using certain techniques to get traders and investors to invest in them and lose money.

Cryptocurrency scam, ICO or DeFi is a knowingly fraudulent project created to raise funds and other types of deception without fulfilling obligations to investors. Despite the peculiarities of each of the trends, their signs are similar in all cases. They are related to the team, idea, marketing structure, tokenomics and other nuances. Below we will consider the types of scam and their peculiarities.

Types of scam

Time scams happen:

  • short-term - work for no more than 3-6 months, after which they disappear;
  • long-term - focused on the HYIP component, can exist for several years.

In terms of complexity:

  • simple - focused on mass and the possibility of deceiving at least one out of 10 people;
  • medium - have the necessary design and documents, are oriented to the connoisseurs of the blockchain sphere, are recognized by deep study;
  • complex - problematic scams from a detection standpoint, done at a high level.

On Purpose:

  • scam - cryptocurrency scam projects, ICOs, DeFi, which are immediately set up for fraud;
  • forced measure - they come to deception gradually because of a failed ICO or for other reasons.

tips around scam

How does scam in cryptocurrency, DeFi, ICO work?

Rug pulls

When you buy a token, it is usually attached to a liquidity pool. A liquidity pool is the amount of funds that are locked into a contract, creating a sort of "pool" where you can buy and sell coins. So that you don't have to wait for someone to confirm your buy or sell, automated market makers use pools, thus allowing you to trade quickly and efficiently.

Scammers operate according to the following scheme - they launch a new coin, attach it to the liquidity pool and wait for people to start buying coins. As soon as enough people buy the coins, the scammers reduce the liquidity pool, withdraw all the money and leave users with the devalued coin. The scam is discovered when it is too late.


Such schemes are often less obvious. Even experienced traders fall victim to hanipots, they see how the price of a coin is "pumped up" and "jump on the train" without checking everything thoroughly.

How it works?
Scammers insert a snippet of code into the contract that allows coins to be withdrawn only to specific (their own) wallets.

They launch the coin and people start buying it. Seeing the coin "pump up" people think, "Wow, awesome!". The value goes up and up and up. "There are few or no red candles on the chart. Users linger for a while, waiting for more growth, and then they decide that this is enough and try to withdraw their money. And only here they realize that they can't do it, because the contract says that withdrawal of money is allowed only to specific wallets.

The money hangs in the air and there's nothing you can do about it. And the scammer can withdraw the money at any time.

Pump & Dump

A scheme to artificially increase the rate of cryptocurrency with a subsequent price collapse. In this scheme, fraudsters sell new unknown tokens, convincing that their price will rise sharply soon.

To raise the rate of cryptocurrency, the organizers of the scheme actively use advertising - specially created websites, channels in messengers, etc. Tokens can also be associated with any popular or fashionable phenomenon or trend. After the excitement arises, fraudsters wait for the price of the asset to rise due to high demand, and then sell their tokens sharply. As a result, the exchange rate collapses and other cryptocurrency holders are left with devalued assets.

Exit scam

Phishing sites or applications are special fake sites that exactly copy real resources. They trick out data to then steal the contents of wallets. Usually the domain name of a fake site differs from the real one by one letter or is located in a different zone.

Fake AirDrop

This is a free coin giveaway for fulfilling certain conditions. In fake giveaways, you need to fulfill a number of conditions, as in the usual ones, and then link your wallet to the site. Only here fraudsters ask for full access to the wallet, unlike real eirdrops, where you give access only to send coins. Having obtained the rights, the attackers withdraw all the coins from the wallet that are there and hide.

Fraud under the guise of ICO

Scammers raise funds from investors by promising to issue extremely promising tokens, but after raising funds, they either terminate the project or launch a platform that does not live up to the original terms and promises.

Financial pyramids (HYIP-projects)

One of the common scams in DeFi are pyramid schemes under the guise of steaking and farming cryptocurrencies. They offer users a supposedly lucrative deposit to store coins or provide liquidity for exchanges.

At the same time, very high fixed profits are promised - hundreds of percent per annum. In reality, everything comes down to raising funds from more and more participants to pay off the previous ones, which is a classic Ponzi scheme.

Fictitious startups

This scheme involves fraudsters attracting funds in the form of cryptocurrency to finance startups on the Internet, they promise dividends. Later on, the organizers fail to fulfill their obligations under various pretexts, and then close the project.

Obtaining cryptocurrency for further investment

In this scheme, the fraudsters request a certain amount of money that they can manage and supposedly invest. In return, they promise the investor a substantial income. After receiving the funds, the fraudsters disappear.

Getting a crypto exchange account under management

A similar fraudulent scheme to the previous one involves attackers obtaining the investor's rights to manage his account on a crypto exchange in order to increase income. Even if real funds cannot be withdrawn, fraudsters can use the money virtually.

Fraud under the guise of cloud mining

Scammers promise high income from the procedure of cryptocurrency mining as a reward, but for this it is suggested to transfer money to a common pool for mining and purchase an application. In reality, mining is either not performed at all or it is simulated.

Bonuses for registration

In this scheme, fraudsters create a new project and offer bonuses for registering on it on condition that the account is replenished on the site. The depositor will not be able to withdraw the cryptocurrency in this case. In this case, the creators of the site may still have user data, which they can use in new criminal schemes.

Fraud under the guise of withdrawal assistance

In this scheme, scammers offer withdrawal services when withdrawal is difficult (e.g., there are limits on the amount of funds that can be withdrawn).

Fakes on social media or in the mail

In 2021, Ilon Musk was appearing on the show Saturday Night Live. At the same time, the attackers streamed the show on their YouTube channel with the text in the description, "Ilon Musk donated 500 billion Dogecoin for all owners of this currency! Everyone can get their share if they go to the site."

Users were offered to transfer a portion of their Dogecoin to a blockchain address to prove ownership of the currency, and in return they were promised to double the amount sent. It was a scam that resulted in almost $5 million dollars being stolen from people.

tips around scam


Nowadays, there are plenty of different ways to defraud investors, so you should always be on the lookout, as it is often impossible to get your money back.

Buying cryptocurrency is a risky business. You can be cheated at any stage, from buying to selling. The basic rules are simple, and the main thing to protect yourself from fraudsters is simply not to ignore them.

  • Do not share logins and passwords with anyone.
  • Don't say the seed phrase.
  • Don't show the private key.
  • Use trusted exchangers.
  • Check investment projects before you invest in them.
  • Check the addresses of the sites you go to.
  • Install apps from trusted sources.
  • Don't socialize with people who come in person.
  • Do not invest in unknown coins.

And the most important advice: take your time. Carefully familiarize yourself with the social networks of the cryptocurrency developer, watch reviews on YouTube, study the sites and applications to which you are moving.

Regards, Lotus Market team.

All posts

Connect to a wallet