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How to Red Flag Scams: Bitcoin Doubler Club, Cryptomia247, Mining Cheap, Orelex, and Wintrust
Last week’s news.Bitcoin.com post warning about common bitcoin scams like “The Bitcoin Code” elicited a plethora of comments and suggestions from readers, asking about and reporting other platforms and services claiming to provide bitcoin investment opportunities. This article examines some of these, and most importantly seeks to provide readers with basic tips for recognizing the general MO of these scam sites before their wallet is SOL.
How to Spot a Scam
When the bitcoin price goes up, and times are already hard for so many individuals financially, scammers have an ideal market for working their wiles and taking naive and unsuspecting victims for all the crypto they can.
As was emphasized in the previous article on the topic, the number one giveaway that something is a scam remains unchanged: if it sounds too good to be true, it almost always is. So before ending up rekt by trying to get rich quick, readers should have a look at the popular scams below and get a feel for their respective modi operandi.
As will quickly become apparent, many scams operate on this template:
- Wow victims with too-good-to-be-true promises of financial gains and returns.
- Get the user to register an email address or bitcoin address to provide an air of legitimacy.
- Have users make their first (and last) deposit.
Bitcoindoubler.club is no different. It is easy to recognize as a scam from the concept itself. Nobody can double someone’s bitcoins in 24 hours as a free service. The introductory text on the website also gives it away:
“We produce bitcoin mining machines that work extremely high levels,” is a vague statement with no real meaning. Notice the awkward English, big promises and bad grammar:
Yes you did not hear wrong, now this service is still paying. Surprisingly, you cannot experience unwanted events. Remember, our goal is to please you .. There is no better advertising marketing than this. Attention: There are many similar sites on the market. Ignore them! Check your address bar! It is a certified and verified system!
This site says there is no way to lose. In investing, however — as any experienced individual knows — there are always many ways to lose. Bitcoindoubler.club demands a minimum 0.003 BTC deposit to participate which, if sent, will be gone forever in a flash.
Wintrust Expert Options
The “Wintrust Expert Options” scam provides a little comic relief with its unique selling point of “beautiful managers in video chat.” It should go without saying though that such a detail is probably impertinent to the operations of any legit forex and crypto investment service.
Like the bitcoin doubler club site, this one promises returns in crypto trading (which are never a guarantee) in a remarkably short time period: “Invest and earn up to 95% in 60 seconds.” Though the sales pitch is different, with Wintrust focusing on trading, and the doubler site focusing on some vague mining magic, the underlying ripoff is the same: sign up, deposit money (either crypto or fiat in this case) and lose it.
When news.Bitcoin.com attempted to use the 24/7 live chat assistance to ask about a platform demo, not surprisingly, no one answered.
Note the vague and meaningless claims. “Regulated.”
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When your team looks this stock photo-y, watch out — you’re probably a scam. The page for “Orelex Financial Services” features a stock image that is easily reverse image searched on Google, revealing that the airbrushed characters in the picture are certainly not the Orelex team.
Investing in “crypography technology” the site promises users ” Sustainable Earnings = Master Business Plan X Customer Certainty.” If the spelling errors and bad grammar are not convincing enough, questionable testimonials from users (another common element of scam pages) saying things like “everythin is good” and multiple repeated comments are further red flags. Plus, the social media links do not lead anywhere. In short, users who don’t want their crypto wallets to be as broke as the site should steer clear.
Another common front for bitcoin scams is to pose as a mining pool. While mining bitcoin can indeed be profitable, it is not effortless, and the fake mining websites give themselves away in the same manner as the others, promising easy gains via vague language designed to dupe those who haven’t done their due diligence in learning about the topic.
Mining Cheap says they are “an industry leading Bitcoin mining pool,” but a quick check of prominent bitcoin pools doesn’t show them anywhere to be found. The site also tries to combine gambling with mining, by giving those that make a deposit “free spins.” Similar fake mining sites exist, so those interested in joining a real mining pool as an investment should be sure to examine all possible options with a very critical eye. Like the other scams Mining Cheap has users sign up, make a deposit, and then promises quick returns which never come.
Cryptomia247 is a fake trading website promising an alluring lifestyle of wealthy digital nomadism:
After you have made a deposit, there is nothing else to do except watch your earnings grow in your account every day. This can be fun, because it means you can be anywhere you want to be in the world, and your capital will still be growing in your account every day, even without you doing anything!
The site features the now familiar one-two-three pattern of promise, register/deposit, lose. The giveaways of poor web design, broken links, and nonsensical offers described in poor English are also present.
Cryptomia247’s plan description is accidentally honest. The money deposited will indeed be gone forever.
Noticing Patterns to Stay Safe
It would be impossible to list all the hundreds or possibly thousands of similar bitcoin and crypto scam sites on the internet today. Those who have shiny bitcoin “B” signs in their eyes would do well to step back and closely examine any site promising them the financial world on a platter for next to nothing; because while investing in the scams listed above may pay for a yacht or nice lifestyle, rest assured it won’t be the victim’s.
Thankfully there are plenty of sound investment, trading, and mining opportunities out there, but they all require something scam platforms do not: hard work, time, and due diligence in research.
What other scam sites are you aware of? What are some other common red flags? Let us know in the comments section below.
Disclaimer: This article is for informational purposes only. It is not an offer or solicitation of an offer to buy or sell, or a recommendation, endorsement, or sponsorship of any products, services, or companies. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
Images courtesy of Shutterstock, fair use.
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Pay Attention to These 7 Bitcoin Scams
Bitcoin – the possible Pandora’s Box of the currency world – has never been short of controversy. Whether it be aiding the black market or scamming users out of millions, bitcoin is no stranger to the front page.
Still, the jury is out on the legality and usefulness of bitcoin – leaving it in a proverbial grey area. Bitcoin’s price has fluctuated throughout its history, falling and rising, currently hovering near $10,000. Perhaps you’ve found bitcoin while it looks to be on the rebound and find yourself interested in it as an investment.
However, there have been several legitimate bitcoin scams that have become infamous, and you need to know about them – but, what are the top 7 bitcoin scams? And how can you avoid them?
What Is a Bitcoin Scam?
For most cases, it may be pretty obvious what a scam is – but with bitcoin, and cryptocurrency in general, things become murkier. Bitcoin itself is an unregulated form of currency that essentially is a mere number that is only given value because of an agreement. It’s basically like a moneybag with a lock on it – the code of which is given to the recipient of the bitcoin (an analogy drawn by Forbes in 2020).
Bitcoin scams have been famously criminal and public in nature. With no bank as a middleman in exchange, things become more complicated; so hackers and con men have had a heyday.
Top 7 Bitcoin Scams
There have been (and undoubtedly will be) nearly countless bitcoin scams, but these frauds make the list of the top 7 worst bitcoin scams to date. Take note.
1. Malware Scams
Malware has long been the hallmark of many online scams. But with cryptocurrency, it poses an increased threat given the nature of the currency in and of itself.
Recently, a tech support site called Bleeping Computer issued a warning about cryptocurrency-targeting malware in hopes of saving customers from sending cryptocoins via transactions, reported Yahoo Finance.
“This type of malware, called CryptoCurrency Clipboard Hijackers, works by monitoring the Windows clipboard for cryptocurrency addresses, and if one is detected, will swap it out with an address that they control,” wrote Lawrence Abrahams, computer forensics and creator of Bleeping Computer.
The malware, CryptoCurrency Clipboard Hijackers (which reportedly manages 2.3 million bitcoin addresses) switches addresses used to transfer cryptocoin with ones the malware controls – thus transferring the coins to the scammers instead. And, according to Asia Times, even MacOS malware has been connected to malware scams involving cryptocurrency investors using trusted sites like Slack and Discord chats – coined “OSX.Dummy.”
2. Fake Bitcoin Exchanges – BitKRX
Surely one of the easiest ways to scam investors is to pose as an affiliate branch of a respectable and legitimate organization. Well, that’s exactly what scammers in the bitcoin field are doing.
South Korean scam BitKRX presented itself as a place to exchange and trade bitcoin, but was ultimately fraudulent. The fake exchange took on part of the name of the real Korean Exchange (KRX), and scammed people out of their money by posing as a respectable and legitimate cryptocurrency exchange.
BitKRX claimed to be a branch of the KRX, a creation of KOSDAQ, South Korean Futures Exchange, and South Korean Stock Exchange, according to Coin Telegraph.
BitKRX used this faux-affiliation to ensnare people to use their system. The scam was exposed in 2020.
3. Ponzi Scheme – MiningMax
“Ponzi bitcoin scam” has got to be the worst combination of words imaginable for financial gurus. And, the reality is just as bad.
Several organizations have scammed people out of millions with Ponzi schemes using bitcoins, including South Korean website MiningMax. The site, which was not registered with the U.S. Securities and Exchange Commission, promised to provide investors with daily ROI’s in exchange for an original investment and commission from getting others to invest (basically, a Ponzi scheme). Apparently, the site was asking people to invest $3,200 for daily ROI’s over two years, and a $200 referral commission for every personally recruited investor, reports claim.
MiningMax’s domain was privately registered in mid-2020, and had a binary compensation structure. The fraudulent crypto-currency scam was reported by affiliates, resulting in 14 arrests in Korea in December of 2020.
Korea has long been a leader in technological developments – bitcoin is no exception. However, after recent controversy, it seems as though this is changing.
“But a lot of governments are looking at this very carefully,” Yoo Byung-joon, business administration professor at Seoul National University and co-author of the 2020 research paper “Is Bitcoin a Viable E-Business?: Empirical Analysis of the Digital Currency’s Speculative Nature,” told South China Morning Post in January. “Some are even considering putting their currencies on the blockchain system. The biggest challenge facing bitcoin now is the potential for misuse, but that’s true of any new technology.”
4. Fake Bitcoin Scam – My Big Coin
A classic (but no less dubious) scam involving bitcoin and cryptocurrency is simply, well, fake currency. One such arbiter of this faux bitcoin was My Big Coin. Essentially, the site sold fake bitcoin. Plain and simple.
In early 2020, My Big Coin, a cryptocurrency scam that lured investors into sinking an alleged $6 million, was sued by the U.S. Commodity Futures Trading Commission, according to a CFTC case filed in late January.
The CFTC case further details that the suit was due to “commodity fraud and misappropriation related to the ongoing solicitation of customers for a virtual currency known as My Big Coin (MBC),” further charging the scam with “misappropriating over $6 million from customers by, among other things, transferring customer funds into personal bank accounts, and using those funds for personal expenses and the purchase of luxury goods.”
Among other things, the site fraudulently claimed that the coin was being actively traded on several platforms, and even mislead investors by claiming it was also partnered with MasterCard, according to the CFTC case.
Those sued included Randall Carter, Mark Gillespie and the My Big Coin Pay, Inc.
5. ICO Scam – Bitcoin Savings and Trust and Centra Tech
Still other scammers have used ICO’s – initial coin offerings – to dupe users out of their money.
Along with the rise in blockchain-backed companies, fake ICOs became popular as a way to back these new companies. However, given the unregulated nature of bitcoin itself, the door has been wide open for fraud.
Most ICO frauds have taken place through getting investors to invest in or through fake ICO websites using faulty wallets, or by posing as real cryptocurrency-based companies.
Notably, $32 million Centra Tech garnered celebrity support (most famously from DJ Khaled), but was exposed for ICO fraud back in April of 2020, according to Fortune. The company was sued for misleading investors and lying about products, among other fraudulent activities.
The famous DJ wrote his support in a caption on Instagram back in 2020.
“I just received my titanium centra debit card. The Centra Card & Centra Wallet app is the ultimate winner in Cryptocurrency debit cards powered by CTR tokens!” Khaled wrote.
The U.S. Securities and Exchange Commission even issued a warning in 2020 about ICO scams and faux investment opportunities, brought on by a slew of celebrities who promoted certain ICOs (like Paris Hilton and Floyd Mayweather Jr. to name a few).
“Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion,” the SEC wrote in an Investor Alert in 2020. “A failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws.”
Another example is Bitcoin Savings and Trust, which was fined $40.7 million in 2020 by the SEC for creating fake investments and using a Ponzi scheme to scam investors. According to Coin Telegraph, Trenton Shavers, the organization’s leader, allegedly scammed investors into giving him 720,000 bitcoins promising a 7% weekly interest on investments – which he then used to pay back old investors and even fill his personal bank accounts.
6. Bitcoin Gold Scam – mybtgwallet.com
Nothing catches the eye of the naïve quite like the promise of gold – bitcoin gold, of course.
That is exactly what mybtgwallet.com did to unsuspecting bitcoin investors.
According to CNN, the bitcoin gold (BTG) wallet duped investors out of $3.2 million in 2020 by promising to allow them to claim their bitcoin gold. The website allegedly used links on a legitimate website (Bitcoin Gold) to get investors to share their private keys or seeds with the scam, as this old screenshot from the website shows.
Before the scam was done, the website managers (slash scammers) was able to get their hands on $107,000 worth of bitcoin gold, $72,000 of litecoin, $30,000 of ethereum, and $3 million of bitcoin, according to CNN.
Bitcoin Gold, the site’s wallet used in the scam, began investigating shortly after, but the site remains controversial. Still, firm released a warning to bitcoin investors.
“It’s worth reminding everyone that it will never be truly safe to enter your private key or mnemonic phrase for a pre-existing wallet into any online website,” Bitcoin Gold wrote. “When you want to sweep new coins from a pre-fork wallet address, best practice is the same as after other forks: Send your old coins to a new wallet first, before you expose the private keys of the original wallet. Following this basic rule of private key management greatly reduces your risk of theft.”
7. Pump and Dump Scam
While this type of scam is certainly not relegated to just bitcoin (thank you for the education, “The Wolf of Wall Street”), a pump-and-dump scam is especially dangerous in the internet space.
The basic idea is that investors hype up (or “pump up”) a certain bitcoin – that is usually an alternative coin that is very cheap but high risk – via investor’s websites, blogs, or even Reddit, according to The Daily Dot. Once the scammers pump up a certain bitcoin enough, skyrocketing its value, they cash out and “dump” their bitcoin onto the naïve investors who bought into the bitcoin thinking it was the next big thing.
Bittrex, a popular bitcoin exchange site, released a set of guidelines to avoid bitcoin pump-and-dump scams.
While “stackin’ penny stocks” may sound like an appealing way to earn an extra buck (thanks to its glamorization by Jordan Belfort), messing in bitcoin scams is nothing to smirk at.
How to Avoid Bitcoin Scams
With the inevitable rise of bitcoin in current and coming years, it is becoming increasingly important to understand and be on the lookout for bitcoin scams that could cost you thousands. As more people become interested in Bitcoin, more people are also likely to try and pull off a scam.
There is no one formula to avoiding being scammed, but reading up on the latest bitcoin red flags, keeping information private, and double checking sources before investing in anything are good standard procedures that may help save you from being duped. Cryptocurrency can be a confusing topic even for the experienced Bitcoin enthusiast, so the more you read up on the world of Bitcoin, the more prepared you can be. After all, knowledge is power.
Familiarize yourself with some of the most commonly observed bitcoin scams to help protect yourself and your finances.
Be wary of blackmail attempts in which strangers threaten you in exchange for bitcoin as a means of extortion. One common execution of this method is by email, where-in the sender transmits a message claiming that he/she has hacked into your computer and is operating it via remote desktop protocol (RDP). The sender says that a key logger has been installed and that your web cam was used to record you doing something you may not want others to know about. The sender provides two options – send bitcoin to suppress the material, or send nothing and see the content sent to your email contacts and spread across your social networks. Scammers use stolen email lists and other leaked user information to run this scheme across thousands of people en masse.
As bitcoin has become more popular, more people have sought to acquire it. Unfortunately, nefarious people have taken advantage of this and have been known to set up fake bitcoin exchanges. These fake exchanges may trick users by offering extremely competitive market prices that lull them into thinking they’re getting a steal, with quick and easy access to some cheap bitcoin. Be sure to use a reputable exchange when buying or selling bitcoin.
Due to the viral nature of how information spreads across on the internet, scammers seek to take advantage of people by offering free giveaways of bitcoin or other digital currencies in exchange for sending a small amount to register, or by providing some personal information. When you see this on a website or social network, it’s best to immediately report the content as fraudulent, so that others don’t fall victim.
Unfortunately it’s very easy for con-artists to create social media accounts and impersonate people. Often times they lie in wait, until the person they’re trying to impersonate publishes content. The impersonator then replies to it with a follow-up message or call to action – like a free giveaway – using an account that looks almost identical to the original poster or author. This makes it seem like the original person is saying it. Alternatively, impersonators may also try to use these same fake accounts to trick others via private or direct message into taking some kind of action in an attempt to defraud or compromise. Never participate in free giveaways, and if you receive an odd request via someone in your network, it’s best to double check to confirm the authenticity via multiple mediums of communication.
Hackers have become very creative at finding ways to steal from people. When sending bitcoin, always be sure to double or triple check the address you’re sending to. Some malware programs, once installed, will change bitcoin addresses when they’re pasted from a user’s clipboard, so that all of the bitcoin unknowingly gets sent to the hacker’s address instead. Since there is little chance of reversing a bitcoin transaction once it’s confirmed by the network, noticing this after the fact means it’s too late and most likely can’t be recovered. It’s a good idea to be super-cautious about what programs you allow to have administrator access on your devices. An up-to-date, reputable virus scanner can also help but is not foolproof.
Meet in Person
When buying or selling bitcoin locally, a counterparty may ask you to meet in person to conduct the exchange. If it isn’t a trusted party that you already know, this is a very risky proposition that could result in you getting robbed or injured. Con-artists have also been known to exchange counterfeit fiat currency in exchange for bitcoin. Consider using a peer-to-peer platform to escrow the funds in place of meeting in person.
Money Transfer Fraud
Do not reply to emails or inbound communications from strangers telling you they need help moving some money, whereafter in exchange for your services, you’ll get a portion of the funds.
Beware of emails purported to be from services you use soliciting you for action, such as resetting your password, or clicking through to provide some sort of interaction with regard to your account. It can be very difficult to spot the difference in a fake email that’s trying to entice you to compromise your account, and a legitimate one sent on behalf of a product or service that you use. When in doubt, considering triple-checking the authenticity of the communication by forwarding it to the company, using the contact email address on their website, calling them on the telephone, and/or reaching out to them via their official social media accounts.
Phishing websites often go hand-in-hand with phishing emails. Phishing emails can link to a replica website designed to steal login credentials or prompt one to install malware. Do not install software or log in to a website unless you are 100% sure it isn’t a fake one. Phishing websites may also appear as sponsored results on search engines or in app marketplaces used by mobile devices. Be wary that you aren’t downloading a fake app or clicking a sponsored link to a fake website.
Do not participate in offerings where one or more people offer you a guaranteed return in exchange for an upfront deposit. This is known as a ponzi scheme, where-in future depositors’ principals are used to pay previous investors. The end result is usually a lot of people losing a lot of money.
Similarly to free giveaways, prize giveaway scams trick people into taking action or supplying information about themselves. For example, supplying a name, address, email and phone number in order to claim a prize. This can allow a hacker to attempt to use the information to gain access to accounts by impersonating you.
Pump and Dumps
Do not trust people who entice you or others to invest because they claim that they know what the bitcoin price is going to be. In a pump and dump scheme, a person (or persons) try to artificially drive up or pump the price so that they can dump their holdings for a profit.
A pyramid scheme promises returns to participants based on the number of people they invite to join. This enables the scheme to grow virally and rapidly, however, it most often doesn’t result in any kind of meaningful return for the members and/or those invited who also joined. Never invite your personal network under the sole goal of accumulating rewards or returns from a product or service, and do not contribute your own capital at the behest of others to accelerate the process.
This is a type of malware that partially or completely blocks access to a device unless you pay a ransom in bitcoin. It’s best to consult the advice of a trusted computer professional for removal assistance, rather than paying the ransom. Be careful about what programs you install on your devices, especially those that request administrator access. Also be sure to double-check that the application you are downloading isn’t a fake one that’s impersonating a legitimate one you’ve used in the past.
Be careful when investing in alternative coins (altcoins). Amongst altcoins there may be scam coins, enticing users to invest via private sales, or with presale discounts. Scam coins may feature a flashy website and/or boast a large community to create a fear of missing out effect on people who discover it. This helps early holders pump up the price so that they can dump and exit their positions for a profit. Scam coins without large communities may do airdrops – offering free coins (or tokens) to people in exchange for joining their communities. This enables scam coins to present their initiatives with inflated traction metrics to make investors feel like they’re missing out when it comes time for them to decide if they’d like to buy-in. Scam coins may also use the word Bitcoin in them in an effort to trick or mislead people into thinking there is a legitimate relationship.
Beware of These Top 5 Bitcoin Scams
The value of bitcoins goes up, and then it comes back down. The press is all over the story. Pundits and market watchers all have their opinion and voice it loudly across the airwaves and the Internet.
Bitcoin has taken us all on quite a rollercoaster ride. Only time will tell whether this cryptocurrency, which has been controversial since its introduction in 2008, will continue booming or if the bubble will burst and prompt more people to short-sell Bitcoin.
One thing is certain: Bitcoin’s meteoric rise has attracted a lot of attention. People may not understand the technology or philosophy behind Bitcoin, but they do see stories of early adopters and savvy investors who turned a few thousand bucks into millions when Bitcoin’s value increased.
And they want to be one of them.
Unfortunately, that puts them in a position—along with veteran investors—to be victims of opportunistic con artists and hackers who perpetrate Bitcoin scams. One of the benefits of cryptocurrency is that it’s unregulated by the government and very private. But that also makes it ripe for fraud.
Let’s check out the top five Bitcoin scams you need to look out for:
Bitcoin Scam 1: Fake Bitcoin Exchanges
In 2020, South Korean financial authorities and the local Bitcoin community exposed one of the most insidious Bitcoin scams: a fake exchange called BitKRX. It presented itself as part of the largest trading platform in the country and took people’s money. To avoid this, you should stick with popular, well-known Bitcoin exchanges and Bitcoin forums so you get news of fakes quickly.
Bitcoin Scam 2: Ponzi Schemes
Bernie Madoff is perhaps the most well-known Ponzi schemer. He did it with mainstream investments. But the principle of a pyramid scheme, in which you take money from new investors to pay previous investors, can be applied to Bitcoin scams. MiningMax, one such scheme, brought in $200 million before 14 fraudsters were arrested. As you can imagine, the investors never got any returns on their Bitcoin investments.
Bitcoin Scam 3: Fake Cryptocurrencies
A common scam is to present a new cryptocurrency as an alternative to Bitcoin. The idea is that it’s too late to cash in on Bitcoin and that you need to invest in one of these up-and-coming cryptocurrencies. My Big Coin was shut down for this reason. The fraudsters behind My Big Coin took $6 million from customers to invest in the fake cryptocurrency and then redirected the funds into their personal bank accounts.
Bitcoin Scam 4: Old School Scams
If somebody emailed or called and said they were from the IRS and that you owed back taxes that had to be paid immediately, would you send them money? Many people do. Instead of having the victim wire money via Western Union or transfer funds to a bank account, con artists are contacting victims and demanding that victims transfer bitcoins. The best way to avoid this scam is to be skeptical of phone calls or emails that say they’re from a government agency. Legitimate authorities wouldn’t contact you that way, and they won’t ask for bitcoins.
Bitcoin Scam 5: Malware
Malware has long been a way for hackers to get passwords needed to access computer networks or steal credit card and bank account numbers. Now they’re using it to conduct another one of the most common Bitcoin scams. If your Bitcoin wallet is connected to the Internet, they can use malware to get access and drain your funds if you’re not protecting yourself from malware.
You can download malware by clicking links in your email. You can also download it from websites and social media. There might be a post, for example, where someone claims a certain program allows you to mine bitcoins for free. Download it, and you get malware.
When in Doubt, Verify
If you’re not sure of a website or email’s legitimacy, contact the company involved directly. If you can’t find the company’s contact information easily on social media or on its website, that’s a red flag.
Don’t Fall Victim to Bitcoin Scams
Bitcoin is a volatile enough investment as it is. Don’t increase your chances of losing money by falling prey to these Bitcoin scams. Stay alert for potential fraudsters and trust your instincts. If something seems too good to be true, it probably is.
Beware of These 5 Bitcoin Scams
Bitcoin’s meteoric rise in prices in 2020 awakened mainstream interest in the original cryptocurrency. But the rise in interest has not been without consequences. One of the downsides of new investors entering the market is the increase in the number of scams, frauds, and stories of retail investors who lose their coins to shady ventures. From ICO scandals to wallet theft and fraud, regular consumers can fall prey to crime easily.
It may seem as though it’s the Wild West for investors, but it doesn’t have to be. While there are certainly risks in the market, the opportunities may be irresistible for some. However, being cautious is always a must, and there are clear signs of scams that investors can look for. By avoiding these traps, users can better their chances of success and protect their investments. These are some of the most common scams and how they can be avoided.
- Bitcoin investors can increase their odds for success by identifying common scams, such as Ponzi schemes, fake ICOs, and fraudulent exchanges.
- One common scam, exposing bitcoin users to theft, is the sale of a hardware wallet with a compromised pre-configured seed phrase, which allows hackers to steal funds.
- Since bitcoin exchanges are unregulated, fraudulent exchanges can trap investors with the promise of unrealistic prices and heavy discounts on use.
- Websites featuring fake ICOs instruct users to deposit funds into a compromised wallet through their site, resulting in the theft of funds.
Hardware Wallet Theft
For users who are concerned with security and privacy, a hardware wallet—a physical device that stores their private keys—is an increasingly popular option. Usually, as small as keychain USB drives, these wallets offer an offline way to help crypto investors protect their bitcoin even further. However, there have been reports that some of them have built-in vulnerabilities that open them to hackers that could easily steal all a user’s holdings.
This is far from the only issue, however. According to Ofir Beigel, the owner of 99Bitcoins.com:
One scam entails selling hardware wallets to users with a ‘pre-configured’ seed phrase hidden under a scratch card. The new user is told that he should scratch the card . and set up the wallet with the compromised seed.
This creates a backdoor that allows hackers to drain funds once a wallet is activated. These scams are becoming more common, but they can easily be avoided by only accepting wallets from trusted sources.
Despite their decentralized nature, most cryptocurrencies are still bought and sold at exchanges. While this makes it easier to find the coins investors desire, there is still no regulatory body overseeing these exchanges in many countries. Thus, many investors have been left penniless when the exchanges they signed up for turn out to be traps. In December of 2020, several South Korean exchanges were exposed, leading to promises of stiffer regulations by the country’s authorities.
These scams are not hard to spot but can be costly if not avoided. One of the biggest red flags is the promise of unrealistic prices. Exchanges that promise heavy discounts on bitcoin use this strategy to lure in unsuspecting victims.
Additionally, users can check exchanges’ URLs. Web addresses should always begin with HTTPS, a sign that traffic is encrypted. Visiting unsecured websites is a bad idea, but alert investors can avoid losing thousands by looking for the right signs.
One of the best results of the cryptocurrency boom has been the rise of the initial coin offering as a way for companies to raise capital. With thousands of new blockchain-based companies entering the market with unique ideas and exciting projects, users can now back their favorite businesses easily. However, this massive explosion of ICO opportunities has inevitably raised the specter of fraud.
There are several ways scammers can separate investors from their bitcoin. One popular method involves creating fake websites that resemble ICOs and instructing users to deposit coins into a compromised wallet. Other times, it’s the ICOs that are at fault.
Centra Tech, for example, a blockchain venture backed by several celebrities, has been sued in the US. The company stands accused of portraying fake team members, misleading investors, and lying about their products. The best way to avoid these scams is close research that involves picking apart the white paper, reviewing the team behind the venture, key board members, and investors. Before making any investment, it’s vital to learn as much about the company as possible to avoid any unpleasant surprises.
Cloud Mining Schemes
Mining is the only way to extract new bitcoins without buying or exchanging them, but it has become an incredibly resource-intensive activity. Due to the unique way new coins are mined, it takes massive amounts of processing power and electricity, and thus money, to mine a coin. However, many companies now offer regular users the ability to rent some server space to mine coins for a set rate.
Some companies offer “lifetime contracts” that keep costs the same and supposedly offer outstanding returns. However, as the difficulty of mining increases, the same investment will return smaller amounts each time. Moreover, some companies make bold claims regarding their returns without being transparent about the true costs and diminishing returns. Others operate Ponzi schemes that can lead to massive losses. It’s vital to look into opportunities and understand the risks and costs associated with mining before investing.
Even in the digital spheres, many multilevel marketing schemes have emerged that offer naïve investors excellent “opportunities” for progressively larger sums of bitcoin. MLMs, as they’re known, are predicated on offering quick returns, but involve taking more money for the promise of even higher profits.
One major company that has been repeatedly outed is OneCoin, whose owners were implicated in several other shady operations. The company offered investors massive earnings, as well as luxury goods and perks for paying more.
However, there is little information on the company outside of its site, and users have left scathing reviews online. It’s important to pay attention to a company’s fine print and ensure that their claims are feasible and real. Avoiding these scams early can protect investors’ wallets.
With the current craze, being vigilant and doing one’s due diligence are a must before investing in bitcoin. The market is also showing signs of maturity, leading to better transparency and clearer rules. Regardless, a smart investor’s first step should always be careful research to ensure their investments are winners.
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