Afraid of crypto? Here’s How To Spot Fake Crypto Exchanges

The growing popularity of crypto has led to an increase in the number of crypto investors and real and fake crypto exchanges.

A cryptocurrency exchange is a marketplace, where cryptocurrencies can be bought and sold. Crypto exchanges provide storage for crypto along with trading services and price discovery through trading activities.

Incidentally, in a recent investigation, cybersecurity firm CloudSEK revealed how Indian investors were duped more than Rs 1,000 crore by a fake crypto exchange scam. However, this is not the only case as according to data shared by Chainalysis, a Singapore-based Blockchain data platform, crypto scammers stole a record $14 billion in 2021.

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Amid all this, crypto industry experts have now suggested ways for investors to spot these bogus exchanges.

According to crypto industry experts, one of the easiest ways to identify and perform basic due diligence is to verify details of the registered company, including information about its founders, media coverage, and customer reviews.

Verifying the details of the registered crypto exchange is the easiest way to discover and perform basic due diligence.

“Companies registered outside of India should not be entrusted with digital assets because it is difficult to conduct due diligence and there are no remedies in the event of fraud,” said Mark Tighe, founder of Catax, a crypto tax, audit and forensics company research. to start.

Tighe said Bitex and Franc Exchange, copies of well-known exchanges such as BitMEX and Binance, came forward to defraud the client under the guise of crypto services.

Crypto industry experts have also said that if a crypto platform delivers very high returns, that is the first red flag.

“Dodgy and non-descript crypto platforms offer ‘too good to be true’ returns on digital assets. If you see a platform with very high returns, this is the first red flag. Given the uncertainty and turmoil in the crypto markets, it is not possible to generate high returns on crypto,” said Sharat Chandra, VP, Research and Analytics, EarthID, a Blockchain-based company.

Mantras To Stay Cautious Against Fake Crypto Exchange

Experts have also suggested ways to be careful with fake crypto exchanges.

“If a stock market promises a return on investment that sounds too good to be true, it probably isn’t. Any offer of guaranteed returns should also be considered suspicious. Since the cryptocurrency market is very volatile, you never know how much you will gain or lose. I would say that potential investors should only use trusted exchanges if they want to invest in cryptocurrencies,” said Dr. Oriol Caudevilla, Board Director of the Global Impact FinTech Forum (GIFT) and FinTech Advisor.

Sandeep Shukla, a professor of computer science and engineering at IIT-Kanpur and co-director of the National Blockchain Project, advises investors never to opt for an exchange based on social media advertisements or direct messages.

“Always do some research and usually you’ll find a genuine exchange that they’re faking,” he says.

“In addition, the behavior of the crypto exchange, in terms of advertising, attracting customers, the nature of the ads they post on social media or via email, is important and should be reported,” he adds.

Fake crypto exchange

More than 900 investors were allegedly scammed by Rs 1200 crore in March 2022 by a website promoting a fake cryptocurrency called Morris Coin.

In March 2022, more than 900 investors were reportedly duped out of Rs 1,200 crore by a website offering a fake cryptocurrency called Morris Coin. This coin has been listed as Franc crypto exchange by some industry experts, which is a fake crypto exchange.

Morris Coin was launched in 2020 by K Nishad, a resident of Malapuram, Kerala, through the initial coin offering (ICO) of “Morris Coin”, a new cryptocurrency token as the main promoter of the cryptocurrency.

According to reports, 900 people contributed to the ICO. Investors were required to hold the tokens in developer-supplied cryptocurrency wallets for 300 days after purchasing 10 Morris coins for Rs 15,000. At this point, the token was to be listed on the Franc exchange, a Coimbatore-based cryptocurrency exchange. Proponents of the tokens guaranteed that their value would increase many times over after signing up, but it all turned out to be a big scam.

Nishad was later booked and arrested by the law enforcement department for the Morris Coin scam.

Delhi Police DCP (Cyber ​​Cell) KPS Malhotra told Outlook Money that there are several platforms masquerading as crypto exchanges and circulating links on WhatsApp/Telegram groups through which some investors trade, opening the door for fraud.

According to him, investors should only make payments through major stock exchange websites, rather than through links.

Chandra added, “These platforms have no due diligence or framework to list tokens, and often come with an anti-dumping clause for tokens. Investors should check the credentials of project owners, the developer team and the community before investing in a crypto token.

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