Spotting Fake Crypto Exchanges And Protecting Your Investments

Spotting Fake Crypto Exchanges And Protecting Your Investments
Discover how you can spot fake or shady crypto exchanges to protect your investments for a secure crypto journey.

In the fast-moving world of cryptocurrency, where everyone’s hoping for big profits, there’s a growing problem we can’t ignore: fake crypto exchanges. As more people get into crypto, more crooks are trying to trick unsuspecting investors.

This article is about helping you understand this issue and why protecting your crypto investments is crucial.

Fake Cryptocurrency Exchanges

Fake and unregulated cryptocurrency exchanges are a major threat, tricking people by pretending to be legitimate platforms. Since the website domain names closely resemble those of well-known exchanges, users are easily misled and begin using these platforms.

They use celebrity endorsements, unsolicited calls, and emails promising huge profits to attract victims. Once you’re on their platform, they flood you with reassuring messages. If you invest, they might ask for hefty initial fees and show you fake data on a fake trading site, making it seem like you’re making big gains.

They’ll pressure you to invest more, using fake returns as bait. Trying to withdraw your money becomes a nightmare, with unexpected fees and fake taxes. Sometimes, your money just disappears. These scammers keep reinventing their tricks.

They create fake websites and social media profiles that look like real exchanges. They send messages on platforms like Telegram and WhatsApp, asking you to register for big rewards. Users fall for it because the website names are similar to real exchanges.

How To Identify Shady Cryptocurrency Exchanges

Unregulated Platform

One of the first red flags to watch for is the absence of proper regulation. Unregistered and unregulated exchanges should immediately raise concerns, as they lack oversight and safeguards that can protect your investments. Always ensure that the exchange you’re considering is compliant with relevant regulations to minimise risks.

Lack Of Transparency

Transparency is key in the world of cryptocurrencies. If an exchange is not forthcoming with information about its operations, team, or financial status, it’s a cause for suspicion.

Trustworthy exchanges are transparent about how they operate, who is behind the platform, and their financial stability. A lack of transparency could suggest hidden agendas.

Unrealistic Promises

Be wary of exchanges that make extravagant promises, particularly those that guarantee substantial profits. While cryptocurrency can be profitable, no investment is risk-free, and exceptionally high returns are often a hallmark of scams.

Exercise caution when confronted with unexpected calls offering investment advice or cryptocurrency purchases.

Even if these calls claim to come from financial experts or brokers, if they originate from an unregulated cryptocurrency exchange, it could suggest potentially illicit activities at play.

Poor Website Design And Functionality

A poorly designed or malfunctioning website can signal a lack of professionalism and attention to detail. Legitimate exchanges invest in creating user-friendly, secure platforms for the benefit of their users. A poorly designed website may not only be frustrating to use but also an indication that something is amiss.

Examples Of Fake Exchanges

Impersonation Scams In India

Unocoin, a cryptocurrency exchange, recently reported scammers enticing users with the promise of a lucrative 30% commission on investments, resulting in victims depositing substantial sums. As the deposits grew, the fraudsters vanished with the funds, rendering victims unable to withdraw their money. 

Some users were deceived by fake websites with domain names similar to Unocoin, losing significant amounts ranging from ₹11,000 to ₹2 lakh. In response to numerous complaints, Unocoin issued a warning, emphasising that trusted cryptocurrency exchanges, including Unocoin and other reputable Indian platforms, never engage in such activities. 

Users were urged to exercise caution and verify the legitimacy of any site or offer before getting involved.

Similarly, replica exchanges of WazirX also exist, a trend acknowledged by Rajagopal Menon, Vice-President of WazirX. These scams involve creating deceptive websites that closely mimic popular online platforms, tricking unsuspecting users into making payments for goods and services that don’t exist. 

CoinSwitch, another exchange, faced a similar issue with multiple fake social media accounts and website domains imitating its platform. In response, CoinSwitch launched a campaign urging users to report such impersonation scams. They received over 1,500 reports highlighting the prevalence of these fraudulent schemes.

Deceptive Crypto Exchanges

Crypto scammers employ a variety of tactics, including identity fraud and phishing schemes, to entice individuals into investing through counterfeit crypto exchanges. A report by Indian cybersecurity firm CloudSEK revealed that Indian investors have fallen victim to these scams, collectively losing as much as ₹1,000 crore. 

The modus operandi involves the creation of imitation crypto exchanges that closely mimic legitimate trading platforms. Scammers initiate contact with users and extend a tempting $100 credit note as a welcoming gesture on the platform. 

These seemingly generous offers are credited to users to foster trust, leading them to deposit additional funds after experiencing apparent profits. Rahul Sasi, CEO of CloudSEK, noted that once users injected their own funds into the platform, all trading and withdrawal capabilities of the fraudulent platform were promptly disabled, leaving investors in disbelief.

Fake Korean Exchanges

In 2017, South Korean authorities uncovered a big cryptocurrency scam involving BitKRX, a fake exchange that pretended to be like the real Korea Exchange (KRX). They used a similar name to look legit. People thought they were investing with KRX, but when they tried to get their money, it was gone.

The authorities also caught two people running another scam exchange called Komid in South Korea. They tricked people into buying cryptocurrencies with false information. Then there was Coinbit, the third-largest exchange in South Korea, which was seized by the police because almost all of its transactions were fake.

Researching Crypto Exchanges

When you want to use a crypto exchange to buy cryptocurrencies like Bitcoin and others, it’s essential to do some research to make sure it’s safe and trustworthy. Always look for reviews and feedback from people who have used the exchange to see if they had a good experience.

Check if they use things like 2FA or cold storage to keep your funds safe. It’s essential to know who’s running the exchange. Check if they have experienced and trustworthy people on their team.

Look for information about the company’s history and reputation. To stay informed about the exchange and the crypto world in general, use reliable cryptocurrency news websites. They’ll keep you updated on any important developments or issues with the exchange.


In the world of cryptocurrency, keeping your investments safe is important. We’ve talked about how to spot fake crypto exchanges and protect your digital money. By watching out for warning signs like unregulated exchanges, secrecy, big promises, and bad websites, you can avoid getting scammed.

Being cautious and doing your homework is like wearing armour in the crypto world. Researching exchanges, using secure ones, checking who’s behind them, and reading trusted news helps you make smart choices. Remember, it’s your money, so be smart and stay safe in the crypto world.


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