How not to give money into the wrong hands: fraud schemes with asset management

Asset management is a hot topic in the crypto field. The demand is great, but there are many more malicious managers in comparison with usual assets. Let us find out the schemes of taking money away and how to avoid them.

What are the chances of being tricked?

To get a stable income from trading, you need special knowledge. Therefore, there is a stable demand for asset management in cryptocurrency. But among all the private traders and funds offering the service, the number of fraudsters is large. After all, cryptocurrency is a young and “wild” market and still not completely regulated by authorities.

In Russia, Europe, and the USA, misappropriation of someone else's cryptocurrency qualifies as theft (fraud) and entails a criminal sanction. But if a trader is in another country, it will be very difficult to bring him to justice.

The best way to keep your capital safe is not to give money into the wrong hands.

The fraud schemes

An easy way to steal cryptocurrency is to make the owner transfer it to a wallet controlled by the trader. And then just steal it and hide. But this is an option for the most reckless investors. In a case with a more careful investor, the scheme becomes more complicated.

The most common is “Ponzi scheme”: a trader does not actually trade on the crypto exchange, but pays dividends to old investors from new ones. One day he makes off with the money. A pyramid founder can look quite trustworthy: he might run his own channel or blog and having hundreds of reviews from early contributors.

Incompetence and trading "at random" is also a kind of fraud. That's how it goes: a trader without experience and knowledge takes a big money to manage. The person builds trust through publicity and a portfolio made with a couple of successful demo accounts. If the margin trade is successful, they will finish the trade honestly; if not, they will still the money and disappear.

Four rules to save your investments

Now you know the methods of checking a trader that do not work. And they are: reviews; public channels in social media; ratings. A portfolio of demo accounts is also not very indicative: a trader could open dozens of them on Binance, Exmo, and other exchanges and choose 3-4 successful ones to demonstrate. So it's time to talk about efficient ways of checking.

  • Never transfer funds. Give to the trader API keys only, without withdrawal rights.
  • Discuss and write down all the terms of cooperation, at least in Google Docs.
  • Find out the real history of the trader's transactions. shows the success of real trades and makes a rate of traders according to it.
  • Look into all the trader's indicators: account age, expected profitability, max drawdown.

With all of this, you will be able to highlight really successful and experienced traders. And then choose the best one.

Have a great profit in trading!