How to spot unrealistic crypto yield claims
Spot an unrealistic crypto yield claim by comparing it with staking and lending rates, then check the platform's registration and withdrawal terms.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
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- A return the platform says will not vary is a warning sign.
- Registration with a US regulator is not insurance.
- Past payouts can come from new deposits.
A yield offer shows a percentage, and that number alone tells you little. The checks cover where the return comes from, the platform's record, and the withdrawal terms.
What do the promised returns mean?
A promised return is a claim about where the money comes from. It can come from borrower interest, staking rewards, or token emissions paid from the platform's own token. Compare it with staking and lending rates, because a return far above those rates needs a reason you can name. In 2022, large crypto lenders froze withdrawals after advertising high yields.
How to spot an unrealistic claim
A claim can look professional and still not add up. Registration, disclosures, withdrawal terms, and referrals are checkable before you send money.
- 1Check the registrationLook for SEC or CFTC registration and search investor.gov. The SEC charged BlockFi in February 2022 over its crypto lending product.
- 2Read the disclosuresRead how the platform says it earns the yield and what risks it lists. A vague explanation is a warning sign.
- 3Compare the rateCompare the promised yield with staking and lending rates. A fixed return is a warning sign, since those rates move with the market.
- 4Check withdrawal termsLook for lockups, withdrawal limits, penalties, or a queue. Those clauses decide whether you can get your money out.
- 5Question the referral chainIf the offer pays more for new depositors than the deposit earns, new money may be paying older withdrawals.
What to do after you spot red flags
Once the terms or the regulator record do not hold up, stop sending money and stop recruiting others. Reports are free and give regulators a record.
- Report the offer to the SEC through investor.gov and to the CFTC.
- File a complaint with the FTC and your state attorney general.
- Keep the offer page, emails, dates, and amounts.
Frequently asked questions
No. Staking rewards follow a network's rules and usually vary. Lending yields depend on borrowers and the platform's credit decisions.
No. FDIC covers bank deposits and SIPC covers brokerage failures. Neither covers a crypto yield account balance.
US regulators have limited reach abroad, but the FTC, the SEC, and the FBI's IC3 still take reports.
