Vigilance in the Virtual World: Top Three Ways Crypto Brokers Can Rip You Off

The allure of cryptocurrency investments has brought with it a wave of opportunistic entities, some less scrupulous than others. Crypto brokers, serving as middlemen for buyers and sellers of digital currencies, can provide valuable services, but they also pose risks. With scams and fraudulent activities rampant in the cryptosphere, it’s crucial for investors to be aware of the ways in which they can be deceived. This article highlights the top three tactics that untrustworthy crypto brokers might use to rip off their clients.

1. Hidden Fees and Misleading Pricing Structures

One of the most common grievances from crypto investors is the opaque fee structure that some brokers impose. Here’s how brokers can use this to their advantage:

  • High Spread Margins: Brokers can charge a wide spread between the buying and selling prices of cryptocurrencies. This practice ensures they make a profit but can leave traders with a disadvantageous entry or exit point.
  • Transaction Fees: Some brokers levy hefty fees for every transaction or for withdrawals and deposits. These fees can sometimes be hidden in the fine print of user agreements.
  • Inactivity Fees: Certain brokers penalize users for not trading frequently enough by charging inactivity fees, which can quickly erode the balance of an infrequently used account.

2. Market Manipulation

Crypto brokers with ill intentions may engage in market manipulation, using their influence and the lack of regulation in the crypto market to skew prices or liquidity in their favor. Here are ways they might do this:

  • Wash Trading: This involves creating misleading market activity by simultaneously buying and selling the same cryptocurrencies. This false volume can attract unsuspecting investors who believe the asset is in high demand.
  • Pump and Dump Schemes: Brokers or affiliated traders may hype up a particular coin (pumping) to drive up its price before selling off their holdings at a peak (dumping), resulting in a sudden price crash and losses for other investors.
  • Stop-Loss Hunting: If a broker has access to their clients’ pending orders, such as stop-losses, they might intentionally push the market price to a level where stop-losses get triggered, benefitting from the resulting price movements.

3. Non-transparent or Malicious Custodial Practices

When investors trade cryptocurrencies using a broker, they often entrust the custody of their assets to the brokerage’s wallet systems. Untrustworthy practices in this area include:

  • Lack of Security: Brokers may not implement sufficient security measures, leading to the risk of hacking and theft.
  • Misuse of Funds: Some brokers might use clients’ deposits for unauthorized investments or to cover operational expenses, compromising the integrity of funds.
  • Delay in Withdrawals: By delaying withdrawal requests, brokers can hold onto investor funds longer than necessary, which can be particularly detrimental if the market is volatile.

Protecting Yourself from Dishonest Brokers

To safeguard against these deceptive practices, potential investors should conduct thorough research before selecting a crypto broker. Here’s what they can do to minimize risks:

  • Read the Fine Print: Understand all fee structures and terms of service before investing.
  • Verify Security Protocols: Ensure the broker uses strong security measures to protect funds.
  • Use Regulated Brokers: Choose brokers that are regulated by financial authorities and adhere to known compliance standards.
  • Track Market Activity: Monitor trading volumes and market movements from multiple sources to spot anomalies.
  • Maintain Self-Custody When Possible: Consider storing cryptocurrencies in a private wallet over which you have full control to avoid the risks associated with custodial services.


While the revolutionary potential of cryptocurrencies continues to intrigue investors, the sector’s relative novelty and regulation lag make it fertile ground for exploitation by dishonest brokers. By staying informed and vigilant, investors can protect their interests and navigate the cryptocurrency markets with greater assurance and safety. But it’s important to add that not all brokers are bad. Read our article about the role and importance of brokers in the crypto marketplace.

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