How to Avoid Crypto Scams? What is Binance Red Alarm Feature?

Although cryptocurrency has risen at an unprecedented pace in recent years, and investors adopted it as a tool of investment and trading rapidly, the surge of scams, rug pulls, and phishing attacks have rattled the crypto world, pulling back the users due to fear of losing their all hard-earned money. To curb such crypto scams Binance cryptocurrency exchange has launched a unique feature called Red Alarm, which is what we are going to discuss in this article to help you save your funds from scams or rug pull.

Before we move ahead to understand what is rug pull, how to avoid crypto scams, and how Binance’s Red Alarm feature protects investors from potential rug pull, let’s have a look at Binance.

What is Binance?

Binance is one of the world’s biggest cryptocurrency exchanges allowing investors and traders to buy, sell, and trade cryptocurrency on the go. It supports 600+ cryptocurrencies in over 100 countries. Binance provides users with an online cryptocurrency wallet where they can store their digital funds. Binance allows its users to earn passive income through its feature Binance Earn. Binance runs on BNB Chain, a blockchain project initiated by Binance for the development of decentralized finance (DeFi) ecosystem. 

What is Rug Pull?

It is a kind of fraud in which a cryptocurrency developer suddenly abandons a crypto project and run away with all the funds of the inventors. Such rug pull scams have been part of popular decentralized finance (DeFi) platforms, decentralized exchanges (DEXs), and other decentralized applications (dApps) that run on the blockchain.

In such cases, usually, an individual or a group creates a cryptocurrency token on a free-to-use blockchain such as Binance and Ethereum. They list their token on popular crypto exchanges and pair them with well-known cryptocurrencies like BNB, BTC, ETH, and XRP to gain investors’ confidence. 

Create Hype on Social Media

To make it appear more authentic and appealing they inject a big amount of liquidity into their pool, and create a big hype around their token on social media platforms like Facebook, Twitter, Instagram, etc. They run hashtag trends on social media to create a buzz.

As a result, investors start buying their tokens in large numbers for fiat money or any other cryptocurrency. After a huge number of users swap their BTC, BNB, or ETH for the developer’s token, they suddenly withdraw all the funds from the liquidity pool, and run away, leaving the price at zero.

List Their Token Without Audit 

The scammers create their tokens using free and open-source blockchain platforms like Binance or Ethereum. They list their token on crypto exchanges where the listing is free and does not require a mandatory audit. They pump a lot of funds into the liquidity pool to skyrocket the price suddenly which works as a temptation for crypto investors to buy the token

What is Red Alarm?  

It is a security feature developed by Binance to protect investors from crypto fraud. One of the most important features of the Binance Red Alarm is that it flags suspicious projects 

whose contract works differently from what has been advertised. It raises alarm when it spots contracts that could be risky for users’ funds. As the founder and CEO of Binance Changpeng Zhao claimed, the Red Alarm crypto platform has flagged 50 projects as potential scams and rug pulls.

Flagged projects include Pandas, koalas, and cyborgs, a mix of crypto spin-offs like Dogecoin (DOGE) and Binance.

BNB Chain launched the Red Alarm feature to protect investors and traders from potential rug pulls and scams. It flags suspicious projects based on two main criteria: 

  • If the contract performs differently from what the project owners advertised
  • If the contract shows risks that might influence users’ funds.

In July 2022 the Red Alarm system analyzed over 3,300 contracts for scams. It flags new projects that have not been tested and do not have genuine products. It analyzes the basic features to identify a scam, rug pull, and phishing. 

The Binance’s advanced alarming system ensures real-time identification of risky projects and puts such projects on the Red Alarm list to warn their users to invest cautiously. The system allows the users to assess the risks and logical flaws of projects themselves using the contract address of the project.

How to Avoid Crypto Scams?

Lets us have a look at how to avoid crypto scams:

  • Create a crypto account only on an authentic crypto platform such as Binance, Bitcoin, Ethereum, etc.
  • Create an account by directly visiting their official website and not via a third party
  • Check its background to verify if it is the official website
  •  Ignore unrealistic high ROI investments 
  • Don’t believe in requests received from impersonators claiming to be from the government
  • Do not withdraw your funds to unofficial addresses or platforms 
  • Do not reveal your verification code or account information to third party 


Due to high ROI, cryptocurrency has become the number one choice of scammers to cheat investors and run away with all their funds. Investors need to be extra vigilant while choosing the right cryptocurrency and exchange to avoid any potential loss. Hopefully, the above tips on how to avoid crypto scams will help you stay away from such scams.

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