Beware of These Top 5 Bitcoin Scams
The value goes up; 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.
Over the last couple of months, Bitcoin has certainly taken us all on quite a rollercoaster ride. Only time will tell whether this crypto-currency, which has been controversial since its introduction in 2008, will continue booming or if the bubble will burst... prompting more and more people to short-sell Bitcoin.
One thing is for certain: Bitcoin’s meteoric rise has attracted much attention from the mainstream for the first time. 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 men and hackers who perpetrate Bitcoin scams. One of the benefits of a crypto-currency is that it’s unregulated by the government and very private. But that also makes it ripe for fraud.
And, as it has grown in popularity, so too has grown the number of Bitcoin scams out there. In fact, a recent university study contends that there is at least one new Bitcoin scam emerging each day.
So let’s check out the top five Bitcoin scams you need to look out for:
Bitcoin Scam 1: Fake Bitcoin Exchanges
Recently 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 frequent Bitcoin forums so you get news of fakes quickly.
There are also con men who pretend to be connected to well-known exchanges, say through an app or a fake website. When the users logged in, they unwittingly gave scammers their account details.
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, holds true for Bitcoin scams that have been uncovered recently. 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—it was just on “paper.”
Bitcoin Scam 3: Fake Crypto-Currencies
A common scam is to present a new crypto-currency 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 crypto-currencies. My Big Coin was recently shut down for this reason. The fraudsters behind My Big Coin took $6 million from customers supposedly to invest into the crypto-currency. But instead they re-directed 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 said you owed back taxes that had to be paid immediately… would you send them money? Believe or not, many people do. The old school method is to have the victim wire money via Western Union or transfer funds to a bank account. Now con men are contacting victims and demanding that victims transfer Bitcoin to their wallet. There’s an easy fix—don’t trust those calls or emails. Legitimate authorities wouldn’t contact you that way – and they won’t ask for Bitcoin, as you can imagine.
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 you’re Bitcoin wallet is connected to the Internet, they can use the malware to get access and drain your funds if you're not protecting yourself from malware.
You’ll find this malware in your email but also on websites and social media. There might be a post, for example, where someone claims a certain program allows you to mine Bitcoin for free. Download and you get malware.
Don’t Fall Victim to Bitcoin Scams
Bitcoin is a volatile enough investment as it is… with plenty of risk. Don’t increase your changes of losing money by falling prey to these Bitcoin scams. Stay alert for potential fraudsters.