Cryptocurrency has become increasingly possible over the past few years. As a result, the internet is now flooded with companies you can purchase crypto products, games, or services from.
But how do you know when a company is legit, versus when they are a scam? Luckily, there are a few tell-tale signs to knowing when a cryptocurrency company is legitimate. We will cover them in this article.
How to Tell is a Crypto Company is Legit
Step 1: Look at Their Webpage
Start out by pulling up their website in your browser. Scroll down the main page. Click around.
- Is the website user friendly?
- Does it look nice?
- Is there a way to navigate from page to page?
While these may seem like the basic aspects of a website, you’d be surprised by how many cryptocurrency companies are missing these basic things. If the website, you are looking at doesn’t pass the above three questions, you can probably dismiss it as being a scam already.
Step 2: Look for a Whitepaper
A whitepaper is an overview of how a technology works or is planned to work. An honest company should have no problem displaying their whitepaper proudly for you to click on.
The whitepaper should be easy to click on, and when you open it, you should see at least a few pages of the technological information of a cryptocurrency. If you have some tech know-how, give the document a read through to make sure it makes sense.
Even if you don’t know computer tech, you should still open the document to take a look. Some famous crypto scams, like The Squid Game token, had a whitepaper section listed on their website, but upon closer look, the document had nothing to do with cryptocurrency—if only potential investors had opened it before investing!
Note: Not all crypto sites will have a whitepaper. This is especially true for exchanges or games you may want to play. If you don’t see a whitepaper, don’t write off the company just yet. Just continue to step 3.
Step 3: Look for the CEO
After you have determined that a crypto company at least has some science behind their project, the next step is to look for the CEO of the company. Most sites will have this on the website somewhere.
If there is no picture on the website, the next step is to google the name of the CEO. Even if they haven’t listed their name on the website, they should show up with a simple google search. As a result of this google search, you should have a way to contact the CEO, like a social media profile or an email.
If you cannot find the CEO of a company through a google search or on the website, do not invest. The company is likely a scam.
Step 4: Contact the Company
Once you have discovered there is a CEO, the next step is to contact the company. If the website has customer service, this is the quickest to vet the company. Send them an email, chat, or other contact and wait for a response.
If you don’t get a response within 24 or 48 hours, this is a sign that the company may not be legit. This isn’t always the case though (as some smaller companies have less employees) but it can be a red flag.
Step 5: Check Registration/Ask Questions
After you have made contact with the company, ask about where their company is registered as well as any other questions you may have. This can give you an idea under what regulations they operate and can help soothe any concerns you may have.
Remember to be cautious investing in a company which is based in a country that is not your own. In these cases, you may not be protected if they are doing something illegal. For example, the US only provides deposit protection for US citizens when investing in US companies.
If the company is unregistered, or if you still don’t get a response to your questions, it is probably better not to invest.
Step 6: Submit a Test Amount
If the website has passed all the requirements until now, it is time to perform a small test. Deposit a small amount of money on the site (we recommend an amount you are comfortable to lose) and purchase their product or invest. Within a week or two, request to withdrawal your deposit and see what happens.
If you are unable to withdraw your money, then you have your answer about the site.
While it can be frustrating to follow this entire process, especially when a deal looks good, it is much better to perform this due diligence and only risk losing $20 rather than your entire life savings.
Keep in mind that this process, while it can help, is not fool proof. You can still risk losing your money anytime you invest in cryptocurrency. If you are worried about investing, ensure you discuss it with someone you trust before you proceed.
What Should I Do If I Find a Scam?
If you discover a website is a scam during the above process, then you should notify local authorities where that business is based. For example, if a company says they are based in Hong Kong, you will want to notify the authorities there so they can look into it.
Most developed countries have a website where you can report potential scams to the government. Not all countries have this, however, so don’t stress yourself out if you can’t find one. If you have found a scam, but it is registered in Pakistan for instance, just let it go and don’t buy the product. You can notify your family and friends if you so choose but know that you will be unlikely to be able to notify local authorities to have the site shut down.
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