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 2017, 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.