Crypto Scam Prevention Guide
Decentralisation and smart contracts offer financial freedom — but once your assets leave your wallet, they cannot be recalled by a central authority. This guide covers the structural warning signs of the three most common Web3 exploits, and how real-time machine learning keeps you ahead of them.
Threat #1: The rug pull (liquidity theft)
A rug pull happens when malicious developers create a token, inflate its price through marketing or wash trading, then drain all backing liquidity from the DEX pool — rendering the token worthless.
Red flags
- Unlocked liquidity: LP tokens held in the creator's wallet rather than locked in a verified contract can be withdrawn at any moment.
- High token concentration: a handful of anonymous wallets holding more than 20% of supply can crash the market instantly.
- Unverified contract code: unpublished source code usually hides malicious functions.
- Hidden minting or blacklist functions: code that mints new tokens at will, or blocks regular users from selling while insiders dump.
How to protect yourself
- Verify LP locks — check that liquidity is locked and review the lock duration (ideally six months or longer).
- Use bytecode scanners that analyse contracts for malicious administrative control functions.
- Monitor transfer restrictions — verify others can actually sell before investing. Buy-enabled-but-sell-blocked is a honeypot.
Threat #2: Wallet drainers (malicious approvals)
Wallet drainers are scripts embedded in phishing sites that mimic DeFi protocols, NFT mints, or token claims. Instead of a normal transaction, you sign an approval giving the scammer's contract permission to transfer everything in your wallet.
Red flags
- High-pressure tactics: "Claim your airdrop in 5 minutes" exists to make you act without verifying.
- Suspicious URLs: lookalike domains such as
app-uniswap.orginstead ofuniswap.org. - Unclear wallet signatures: a
SignorSetApprovalForAllrequest on a platform you're not actively trading on is an immediate threat.
How to protect yourself
- Read the exact permission request in your wallet pop-up. "Set Approval For All" or "Unlimited Allowance" on a site that should only be connecting? Reject it.
- Use a burner wallet — never connect cold storage to unverified sites.
- Revoke permissions regularly using reputable tools (e.g. revoke.cash or explorer approval tools).
Threat #3: Wash trading (artificial volume)
Wash trading is market manipulation where one entity or a coordinated group buys and sells the same asset to fabricate volume, demand, and liquidity.
Red flags
- Self-funding wallets: closed transaction loops where wallet A buys, transfers to wallet B, which buys the same asset back.
- Back-and-forth sales: an NFT trading 20 times a day between the same two or three wallets at rising prices.
- Unnatural volume spikes: zero community engagement but sudden millions in DEX volume.
How to protect yourself
- Look past the volume metric — check individual transaction logs for same-entity buyers and sellers.
- Verify distribution — volume spread across hundreds of distinct addresses is healthy; five self-funding wallets is not.
The Fraudalysis prevention shield
Manual checking matters, but scammers increasingly deploy hidden proxy architectures and obfuscated transactions. Fraudalysis automates this defence: scanning contract deployments for honeypot features the moment a token launches, tracking liquidity pool movements and warning on rapid withdrawals, and maintaining continuously updated risk scores so platforms can block connection requests from active drainer networks before users sign.