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How to Identify Bitcoin & Cryptocurrency Scams

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The world of cryptocurrency is in many ways still the wild west, it’s a world filled with misinformation with the intention of funneling funds from unsuspecting investors. Our team receives 1 to 5 emails per day asking about various companies or people that they believe are intending to or have successfully fleeced them. All of the examples below are from people who have contacted us.

Most of these scams are fairly easy to identify with a little bit of research and due diligence. Below are some ways to easily identify these scams.

Guaranteed Returns

If something sounds too good to be true it probably is, and this is no different in the world of cryptocurrency. It is impossible for anyone to guarantee any type of return to anyone who is investing in bitcoin, or cryptocurrency.

While it is extremely possible that the cryptocurrency that you purchase moves up 20% or even 50%, it is just as likely that it goes down this identical amount. If anywhere advertises guaranteed daily, weekly, monthly, or annual returns then you should simply move on. The risk is simply too high. Let’s give an example of a former website promising these type of returns that was successful with funneling $15 Million USD from investors.

Below is another example of a company that promises guaranteed returns with a domain name that should be an indicator that this company is not legitimate: https://www.standard-optimumminer.com/

The promised returns are 20% profit per week, based on compound interest if they simply invested their own money this would be an annual return of 1,310,363.1% per year. Obviously this is not a sustainable or realistic return.

 

Cloud Mining Scams

While there are some legitimate bitcoin cloud mining operators they are few and far in-between. We decline advertising by any cloud mining company due to the high risk of fraud. If you are interested in Bitcoin, you are better off buying Bitcoin directly from a regulated exchange than to “invest” in cloud mining companies.

How cloud mining works is “investors” buy or lease hash rates from a third-party cloud provider, investors are then compensated with a percentage of the mined bitcoin. This sounds great in theory, but there are no guarantees from the cloud mining operator that they will continue to payout once they have collected your money. It’s also the most common type of scam, as the fraudulent operator can collect money for several months before unsuspecting customers begin asking where their bitcoin is, and by then the fraudulent operator can shut down the website, and start a new one.

Unless you are intimately familiar with the cryptocurrency industry, you should just avoid anything cloud mining.

This example website below https://coinlite.io/ was successful in stealing funds, even when they were unable to spell “mining” properly all over the website.

ICOs (Initial Coin Offerings)

These were popular during the ICO boom in 2017, but they have lost popularity and have since been replaced by IEOs (Initial Exchange Offerings), STOs (Security Token Offerings) and other types of funding. Unless you have some type of information from a reputable contact you should avoid investing in ICOs. If you plan on investing in an ICO, never do so by clicking on a link advertised in social media, or anyone advertising on Google. Unfortunately, Google has a reputation for accepting ads from fraudulent companies, as they perform zero due diligence. Google does have an automated system to refuse certain types of cryptocurrency ads, but it’s very easy to bypass by using non-trigger keywords in the ad itself.

The reason to avoid ICOs is that it is next to impossible to identify whether or not an ICO is legitimate. If you want to invest in cryptocurrency it makes more sense to purchase the tokens on a legitimate exchange than to risk buying from an unknown ICO.

Depending on the report that is reviewed, anywhere between 70 to 90% of ICOs during 2017 and 2018 were scams. Investing in ICOs is simply playing with fire.

Social Media

The most common way unsuspecting investors are fleeced is by social media and YouTube. Twitter and Reddit are the most popular platforms for predatorial behavior.

These type of scams are quite obvious to anyone in the industry but they are still shockingly successful. How these normally operate is they find a celebrity, most often a politician or someone who has in the past tweeted positively about cryptocurrency, and they create a fake promotion.

This promotion is designed to appear to be from the celebrity, but in reality it’s simply made to deceive users, and there is no actual endorsement by the celebrity and the celebrity is certainly not receiving the funds.

Never partificipate in any type of promotion where you need to send cryptocurrency to receive some back. The BTC address that is provided is often controlled by a con artist in the Ukraine, Russia, North Korea, or some other overseas jurisdiction which ensures that it is unlikely for you to recover stolen funds.

If there is anything that you should learn is to never buy crypto from anyone that you find on social media, and never send your crypto to anyone on social media. It takes 30 seconds to create a Twitter account, and there is no KYC performed by any social media platform.

This leads us to our next section, how to quickly identify fraudulent operators.

Branding/Logos/Domain Names

Legitimate companies invest in designing brandable logos and easy to remember domain names. They also invest in themselves. Let’s take a look at the screenshot of this scam website https://bitcoinminingexchange1.com.

This website raises so many redflags it’s difficult to know where to start. Let’s begin with the domain name, bitcoinminingexchange1.com is not a domain name that any legitimate operator would ever use as it is impossible to brand. This is known as a throwaway domain, it’s for people who do not care about building a brand, instead they launch a website with the intention of not holding on to it for long. Once they are done with the website/domain name, they clone it and start a new one.

The logo is also a huge red flag, it looks like it took 30 seconds to design. Another red flag is they claim to be a “cloud mining” operator but the images on the website are related to forex trading, something that is completely unrelated to cryptocurrency, yet less cloud mining.

This website is easy to pick apart, and while it screams SCAM it was still successful at funneling money from a large pool of unsuspecting investors.

Typos/Misspellings

One of the common identifiers of a scam website is when a company cannot be bothered to take the time to proofread the copy on their website. Let’s take this scam website https://cctg.io/ as an example, it seems difficult to believe that any legitimate operator would misspell the same word 8 times in a row. In this case they misspelled “up to” wrong 8 times, and then misspelled “average” wrong 8 times, and this is only in this example screenshot. We have highlighted in white the typos.

Due Diligence

What are some due diligence steps that you can take? First of all, ask yourself if this was not a cryptocurrency website would you trust it? Would you trust a stock broker to have a website that looks like the website you are analyzing? If not, then why take the risk? If there’s even a 1% possibility of losing your funds then the risk is too high and you should simply move on.

Here are some basic due diligence steps:

  1. Review the website for spelling mistakes or amateur errors. Often scammers are based out of the Ukraine or Russia, and English is not their first language.
  2. Review the website for logos, or images, that look like they may have been copied from other websites.
  3. Review the “About Us”, or “Meet the Team” page. The profiles of Founders/Owners/Executives generally should link to LinkedIn, or other social media. Click on these social media accounts and perform some research.
  4. Make sure the LinkedIn profiles actually have details regarding the business you are reviewing, this is to avoid the case when a fraudster simply adds someone’s profile, without the person even being aware of it. (Yes, this is common especially with ICO scams).
  5. Review when the domain name was registered and cross-check this with the “About Us” or “Meet the Team” page. You can see when a domain name was registered by using a “Who Is” service such as this one here. A Who Is simply verifies when a domain name was registered and gives some basic information about ownership. Most of the information in a Who Is can be faked, the important detail you are searching for is the registration date. There should be no discrepancy between what they are claiming on the website and when the domain name was registered. For instance if they claim to have been in business for 3 years, but the domain name was registered last year then you have an issue.
  6. Search for the domain name or brand + scam in Google, for example:  “BitConnect Scam”.
  7. If you heard about the great new crypto, ICO, or cloud mining company from Twitter, or Reddit, odds are it’s a scam. These are generally bots that auto-reply to related posts, and most victims are found on these two social media giants. Facebook is a close third.
  8. Pressure Tactics: If you are told you have a limited period of time to capitalize on a new buzzword crypto, or people are trying to capitalizing on your FOMO (Fear of Missing Out) simply move on.
  9. Phone Calls: No legitimate company or broker will ever cold call you to invest.
  10. Follow your gut, do not let greed betray you. Often we know when something feels wrong, if you have this feeling, simply move on. There will always be other opportunities.

Antoine Tardif is the founding partner of Securities.io, the CEO of BlockVentures.com, and has invested in over 50 blockchain & AI projects. He is the founder of Unite.AI a news website for AI and Robotics. He is also a member of the Forbes Technology Council.

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