How to Spot a Crypto Scam: A 5-Step Due Diligence Checklist

The crypto space is filled with incredible innovation, but it's also a minefield of sophisticated scams. Professional-looking websites, slick marketing, and promises of massive returns can easily fool even experienced investors. The key to protecting yourself isn't trying to become a blockchain expert overnight; it's about having a repeatable, logical process for due diligence.

Think of it like auditing a network for security holes. You don't start by reverse-engineering the firewall's firmware. You start with a checklist: Are the default passwords changed? Are the ports locked down? Is the logging enabled? This guide is your checklist for crypto projects.

Step 1: Investigate the Team (The "Who")

This is the most critical step. A project is only as good as the people building it. In crypto, where projects can handle millions of dollars, accountability is non-negotiable.

• Is the team public and verifiable? Look for names, LinkedIn profiles, and a history of previous work. An anonymous team is a massive red flag. It means there is zero accountability if they disappear with your money.
• Do they have relevant experience? Has the lead developer ever shipped a secure smart contract? Does the marketing lead have a verifiable track record? A team of "serial entrepreneurs" with no specific blockchain experience is a warning sign.
• Are they active and professional? Look at their activity on Twitter, Discord, and Telegram. Are they answering tough questions, or are they just posting hype and banning dissenters?

Step 2: Scrutinize the Product (The "What")

A great idea is worthless without execution. You need to see tangible proof that the team can build what they're promising.

• Is there a working product or MVP? Can you test it? Is there a public beta? A project raising millions with nothing but a landing page is what we call "vaporware."
• Is the code public and audited? A legitimate project will have a public GitHub repository. Most importantly, has a reputable security firm audited their smart contracts? If there's no audit, you have to assume the code is insecure or malicious.
• Does it solve a real problem? Is the project's value proposition clear, or is it just a collection of buzzwords like "AI-powered DeFi synergy"? If you can't explain what it does in a single sentence, that's a red flag.

Step 3: Analyze the Tokenomics (The "How")

The token's economic model will determine its long-term viability. Predatory tokenomics are designed to enrich the founders at the expense of public investors.

• Who owns the supply? Look at the token allocation. If a huge percentage is reserved for the "team" and "marketing," with no vesting schedule, that's a setup for a dump.
• Is there inflationary pressure? Does the contract allow for unlimited minting of new tokens? Aggressive inflation will devalue your holdings over time.
• Is the valuation realistic? A brand-new project with no product claiming a multi-billion dollar valuation is a marketing gimmick, not a serious financial assessment.

Step 4: Check the Marketing (The "Hype")

Legitimate projects build communities. Scams manufacture hype.

• Are they promising "guaranteed returns"? This is the oldest trick in the book. All investments carry risk. Any promise of guaranteed profit is the hallmark of a Ponzi scheme.
• Where is the coverage coming from? Is the project being discussed by reputable, independent analysts, or is all the "news" just paid press releases and sponsored influencer posts?
• Is there high-pressure language? Watch out for phrases like "Last chance to buy!" or "Price is about to explode!" These are designed to create FOMO and rush you into a bad decision.

Step 5: Verify the Community (The "Vibe")

A project's community is a powerful indicator of its health.

• Is there genuine discussion? Go to their Discord or Telegram. Are people asking intelligent questions and getting real answers, or is the chat just filled with "wen moon?" GIFs and price speculation?
• Is dissent tolerated? What happens when someone asks a critical question? In a healthy community, it leads to a discussion. In a scam, that person is immediately banned for "FUD" (Fear, Uncertainty, and Doubt).