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DeFi Fraud Master Checklist

Decentralized Finance (DeFi) or Open Finance (OFi) is biggest FinTech Innovation for inclusive banking. Today you reply on Banks for your savings, loans, trading, insurance, investments and more… how about an open and accessible finance network which gives access to savings, loans, trading, insurance, investments and more… anyone in the world with a smartphone and internet connection. Would the world be a better place?

Since it is new FinTech innovation, the lack of awareness creates a room for DeFi Fraud.

What is DeFi Fraud?

“It is defined as Deception or misrepresentation or knowingly engage in a plan, scheme, or activity to provide falsehoods, false hope or FinTech project with the intent to achieve some financial gain… in which the ill-informed investors lose the invested sum of money that can’t be recovered due to the fraudulent DeFi Project.” — Prakash Prasad (CC Licence: Attribution Requested)

After doing extensive research, I have created DeFi Fraud Master Checklist that will be useful to you:

  1. What is project about?
  2. Is the project Promise for future work?
  3. Is the real work on or it’s a shell company?
  4. What is the reputation or background? Have you conducted background investigation yourself?
  5. Does the founding members or programmers free from criminal records (minor or major)?
  6. Do the comply with the Anti-Money Laundering guidelines?
  7. Where are they based or located?
  8. Do the have patent and trademark registered?
  9. Have you done your due diligence for patent and trademark yourself?
  10. How much is their money-at-stake? What is the amount they have invested out-of-their-pocket?
  11. Is the project been endorsed by reputed names and brands?
  12. Is the DeFi Project code been reviewed and bugs are fixed quickly?
  13. Is is too-good to be true?
  14. Is this going to change the traditional centralized finance?
  15. What are the underlying assets?
  16. Who is backing the project?
  17. Have you investigated their social media accounts? Are those legitimate?
  18. How nascent is the project?
  19. How many large investors have parked their funds? Be aware! Can be a Pump-and-Dump Schemes.
  20. Are the KYC checks been done? RBI,UN,FIN-INDRisk Compliance
  21. Is the entity part of Banned list?
  22. Do we see real names in DeFi Projects or Fake Names?
  23. Are they using disposable email address or burner phones?
  24. Are they part of scam alert?
  25. Do you see a high level of trading? Suspicion trigger!
  26. Have the management team done anything before? Like a real life projects?
  27. Are they promising high returns on investment? Ask yourself, can a lottery guarantee you high returns?
  28. Are they open to audits?
  29. Have you checked with the experts or consultant in FinTech Domain?
  30. Does the code full proof? Who has done the code review?
  31. Is the security and hacking risk accounted or insured?
  32. What happens if their is a run-on-the-bank. I meant, think if the project goes bust?
  33. Who is responsible for theft? What are safeguards in place?
  34. Is the news fake or real? or is it camouflaged version?
  35. Are you falling prey to Influencer Shilling Crypto ScamsExample: If you promote a guaranteed 12% per month & 5/10% referral program, you are shilling a pyramid scheme
  36. Are you about be a prey of Quick Sales Triple Bonus? Example: DeFi Sale ends in 2 days, don’t you want to triple your $10,000… Invest Now and also refer your friends to get rewarded!
  37. Is this a Scam Coin? Check out the updated list here…
  38. Is this part of DEAD COIN?
  39. Is this a front running bots Scams? Fake trades to mislead front-runners and investors.
  40. Have you read about ICO Security and Fraud?
  41. Don’t be a phishing victim?

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