The rapid increase in the number of crypto owners in India has led to an immediate need to focus on transaction safety and the prevention of fraud. A massive user base makes effective monitoring and scrutiny difficult and the exchanges that facilitate crypto trading need to remain ever vigilant and ensure tight processes that keep scammers at bay.
This Fraud Awareness Week, WazirX, India's largest crypto exchange, shares how it keeps its customers safe from crypto scams and how investors can stay vigilant.
1. What role does WazirX play in raising investor awareness on scams and frauds?
India currently does not mandate any specific AML/CFT norms for crypto exchanges. We, in our endeavour to make the crypto ecosystem safer for all stakeholders, voluntarily follow the FATF recommendation on VASPs. We also proactively engage with state, central, and international agencies in sharing and establishing international best practices on AML/CFT as stated in our first Transparency Report.
Furthermore, we comply with BACC's self-regulatory code of conduct under the Internet and Mobile Association in absence of regulatory guidelines. On the occasion of #FraudAwarenessWeek, we would like to share six key features of the code of conduct that ensure accountability and customer protection.
• Mandatory online verification and KYC for all customers on our WazirX trading platform
• Checks to prevent fraud and market manipulations
• Audit trail of all transactions
• 100 percent compliance with all Law Enforcement Agencies and tax authorities
• Investor education and for investing and trading in crypto assets
• Grievance Redressal and escalation metrics
Additionally, to further our mission of safeguarding our users and busting common myths that feed negative perception of our various stakeholders, WazirX has launched its dedicated policy arm and also published India’s first-ever Crypto Transparency Report.
2. What are the five best ways for investors to avoid getting trapped in a scam?
Free money is a misnomer and the same holds true for crypto. There might be people online impersonating public figures and promising you 10x returns in exchange for some deposits - do not fall for it.
As an investor, it is your responsibility to do your due diligence. Before investing in a project, always read its whitepaper, about the team and their background, project development status, and team activity on social media.
It is also crucial to trade on legitimate exchanges that follow KYC and AML guidelines. You must also use the official apps. Before downloading an app, or logging in via the web, do ensure that you are using “https,” and entering the correct web address, or downloading it from the app store.
3. What are the red flags in crypto investing that investors should not ignore?
These four events should grab your attention when it comes to spotting red flags in crypto:
• Sudden price surge: Crypto coins without any fundamentals or historic data may show a sudden significant uptick without any warning signals. But best to stay put and research it well without fear of losing out on the rally. The Squid Game Token, for example, touched $2,856 within a week of its launch and sank as swiftly as soon as it was declared fraudulent.
• Validation through crypto transactions: Scammers asking investors to verify their wallets by sending them some crypto tokens is not unheard of. Any such suspicious activities are a cause for exercising caution.
• Promises of high returns with negligible risk: Cryptocurrencies are volatile by nature and need a stomach for risk. If you are promised easy returns with very lucrative terms, it calls for extra caution.
• Over-promotion on social handles: YouTube and other social media handles are often used to heavily market a new coin and lure in investors. When something seems too surreal, do your due diligence on it, and verify before jumping on the bandwagon.
4. What are the three most prevalent crypto frauds?
Sometimes in the pent-up excitement over new coins and in a rush to make some quick money, investors get lured towards peripherally harmless schemes. Here are some of them:
• The global crypto exchanges are brimming with 10,000 crypto coins. While it is a fact that the lion’s share of the market is taken by the top 10 coins, investors find the smaller ones attractive under the misconception that they have skipped the opportunity to invest in the bigger coins.
Under such circumstances, if somebody were to go ahead and create a coin named similarly to Ethereum, we would all be fooled into thinking that it is indeed related to the original Ethereum. Designed to defraud people, such coins need to be filtered out. WazirX believes due diligence is the primary and most effective method of preventing such crypto coins from being released on the exchanges in the first place.
• Pyramid schemes are another common method of swindling people and skimming off their hard-earned money. Sometimes scammers cajole naïve investors into inviting more people into their network and lead them into believing that as the network grows, they will be paid commission on the business done by the new enrollers. Investors are guaranteed 15-20% returns on their money to sweeten the deal and entrap them.
• A plethora of social media channels and handles have been created that mislead people by promising high returns on their investments. Such handles are made to look legal and welcoming with seemingly legitimate posts about cryptocurrency. If an investor has not delved into their background, it is likely that their money will fall into the hands of scam wallets that will eventually be lost in the blockchain.
As an investor, one must always be sure about the terms and the underlying fundamentals of every investment.
Note: This is a partnered post and the answers to the questions have been provided by WazirX Team