Investing in digital assets? Five warning signs of fraud every investor should know

With the Government of India's Digital India initiative and the growing use of technology, the country's financial sector is changing fast. In this era of digital finance, digital assets have emerged as a new and important investment option. Many young and first-time investors are looking for opportunities in the field.

However, as participation grows, the number of online frauds and cyber crimes is also rising to a worrying level. Sumit Gupta, co-founder of CoinDCX, has offered guidance on the matter.

Today's fraudsters are not limited to fake phone calls. They lure investors through social media messages, Telegram groups, WhatsApp messages, attractive mobile apps or websites that look exactly like genuine ones. Those entering the digital assets space must stay alert and not fall for any bait. Every investor should recognise five major warning signs to avoid fraud.

The first warning sign is exaggerated claims of "easy and quick profit". If an investor is promised assured profit with little or no risk, or huge returns in a very short time, that is the biggest red flag. Like other market-linked investments, digital assets also fluctuate and carry risk. Fraudsters dangle such profits to make people transfer money immediately, without giving them time to think. Investors should therefore study what the scheme is, which entity is offering it and whether its authenticity can be verified.

The second warning sign is an investment offer that arrives suddenly from a stranger on WhatsApp, Telegram, social media or email. People who call themselves "investment experts" or "representatives" of a well-known company draw attention. Fake profiles are often created using the names or logos of well-known brands. Investors should not trust the phone number or link in such a message, and should verify the information on the company's official website.

The third warning sign is suspicious websites and apps that look exactly like the real ones. A website or mobile app may look professional and attractive, yet it need not be genuine. Criminals build fake apps and websites that resemble legitimate and well-known financial services. Some fake apps first show notional profits and allow small withdrawals to win the investor's trust. Once trust is established, they make the investor deposit a large sum and then disappear. Apps should therefore be downloaded only from official sources such as Google Play Store or Apple App Store, and the website's URL should be checked carefully.

The fourth warning sign is a demand for an OTP, password or confidential information. A request for a password, OTP (one-time password), private key or wallet details is a very serious red flag. Fraudsters often pose as "customer support representatives" and trick people by saying the account has been blocked and an OTP is needed to unblock it or to complete a transaction. No genuine institution or platform asks you for confidential information. Sensitive information should therefore not be shared with anyone, however big the claim.

The fifth warning sign is "pressure" to make hasty decisions. Creating "urgency" is the main weapon of fraudsters in financial scams. Pressure comes in the form of lines such as "Invest right now or the opportunity will be lost", "Pay extra tax now to withdraw your money" or "Decide before the discount ends". If someone forces a quick decision without allowing time to think, the chance of fraud is highest.