The cryptocurrency world was shocked when the founder of the planet’s second biggest crypto exchange was accused of fraud. Star Xu, who is the man behind OKEx and OKcoin, was detained in Shanghai.
Reports from China revealed that he was taken into police custody on the 10th of September, apparently accused of digital currency fraud. He was released the next day but it isn’t clear whether any further action will be taken against him.
The detainment appears to be in connection with the businessman’s involvement with WFee. While it isn’t clear whether Xu will face further action, this drama has raised the issue of Bitcoin fraud once again.
What is Bitcoin Fraud?
Bitcoin fraud can appear in a number of ways. Perhaps the most serious issue is when an exchange deliberately misleads its customers or misrepresents its products and platform.
Another issue could arise when the site isn’t as secure as it should be. In this case, it could leave the back door open for hackers to come in and steal coins or information from the users.
How can you avoid fraudulent exchanges and trade safely? What should you look for when deciding which Bitcoin exchange to use?
Check Whether it is Regulated and Secure
One of the main issues that some people have with BTC is that this currency in itself is unregulated. Yet, you can feel a far greater sense of security by looking for an exchange that is properly regulated. For example, in our detailed look at eToro we have noted that it is an exchange regulated by the FCA and CySEC. Our extensive Coinbase review shows they have taken an alternative approach. Here, they insure your funds to make sure that you are well protected.
Then there’s security itself – in other words, how difficult user accounts are to hack into. What login procedures do they use? Ideally, it will be a multi-step process that uses two-factor authentication. Is the site highly encrypted and with no known hacks in the past?
Look for Good Reviews
As we just saw, crypto exchange reviews are a good place to find out lots of useful information. You can see all of the good and bad things about each site in these reviews.
Usually, you will find a mixture of positive and negative points. This is the case, for example, with the likes of our Luna exchange review. It is then up to you to decide whether the benefits weigh more heavily than the drawbacks. Of course, if the review makes it clear that this is a scam site then you will want to steer well clear of it.
Don’t Be Taken In By Unbelievable Promises
There is no doubt that investing in Bitcoin is an exciting idea. Many people have made money while also getting a thrill out of buying these digital coins.
Yet, like most kinds of investment, there is no guarantee that you will always come out ahead. Any exchange that makes extravagant promises about how much you will earn should be viewed with caution.
Instead, you should look for a professional approach at all times. A good exchange should show you how to invest and advise of the risks of doing so.