Types of Bitcoin Scams

Asking for Bitcoin Before Buying

When you’re told that you can get free bitcoin for signing up to a website, make sure you’re signing up for a product or service that actually rewards you with bitcoin. Don’t use random websites that offer free bitcoin. A popular scam is an unsecure link that tries to trick you into downloading a “free” game or software. Clicking on the link may take you to a fake website that asks for your banking information, personal data, and any passwords you’ve ever created. It will then send the information to another scammer’s account, giving them access to your online accounts.

Fake Bitcoin Mining

If someone tells you that you can make money in Bitcoin mining, you may think you’ll need expensive equipment to start mining.

Fake Bitcoin Exchange

A scammer may target you through an actual cryptocurrency exchange and offer to buy your cryptocurrency. They say they can easily convert your cryptocurrency to fiat currency, and that you won’t have to convert the cryptocurrency you get back. In most cases, they’ll ask for your private keys, which allow you to access your cryptocurrency. In these cases, most exchanges will turn down the offer if they’re contacted by scammers. These scammers may even make threats or suggest that there’s a national security leak if you don’t cooperate. In any case, this is a scam.

Escrow Scam

This is a relatively common scam that involves getting you to promise you’ll transfer your cryptocurrency to another address, where the scammers can then steal it.

Scammers Targeting Crypto Noobs

Cryptocurrency “miners” receive fees when they process transactions, which adds additional value to each unit of the currency. Miners are usually just run by enthusiasts with spare computers, so there’s a growing market for these mining machines. Buyers can expect to pay around $1,000 for a bitcoin miner, but most scammers are willing to sell them for a fraction of that price, either on Craigslist or eBay, or even on the dark web. Remember: Beware of bogus email addresses in these sorts of offers. The seller might not even be a hacker.

Fraudulent “Tip” Ideas

Bitcoin payment processors also take a fee for processing each transaction. For those who don’t want to spend any real money on cryptocurrency, you might see tips like these:

1. Sending your own confirmation email to a new contact.

How to Spot a Bitcoin Scam

Bitcoin and digital cryptocurrency scams are tricky to spot, so make sure you do your research before following up on a job lead. The Securities and Exchange Commission has strict rules around investment advice and fraud, which typically include an investor being required to give a full disclosure about the investment in a written agreement. The risk of fraud is so significant that an online guide from Investopedia lists three potential red flags:

You have to make a large investment before you’ve received the product or service in return. The opportunity sounds too good to be true. The advice involves trading your own money for the opportunity to make a financial gain.

Fraudsters have shown that they’re not above deceiving companies to make a quick buck.

Double-Check the Website Address

Scammers often create phishing sites that look like official websites, such as btc-e.com and coinbase.com, that look similar to the real ones but use odd-sounding domains like wolftramp.com, skyscoin.com, walletgenerator.info and franker-consulting.com. These sites look legit, but experts advise that you should use a tool such as SSL Watcher to ensure that the website you’re looking at is properly set up. The full name and address of the company’s CEO or CTO should be listed as well.

READ MORE: Bitcoin’s biggest money problem: it’s too easy to spend

Check the Company Address

Again, because there’s a bigger risk of scams online, it’s necessary to verify that the address for the company you’re considering sending your money to is legitimate.

Look for Blockchain

Cryptocurrency is quite a leap in transparency from normal businesses. While most companies now publish their earnings every month, many cryptocurrency ventures do not. When you are looking at a company to invest in, make sure you can verify that their transactions are recorded in an open, distributed public ledger, which is sometimes called the blockchain. And if they are, see if they show transaction histories for different businesses and individual users, which makes their track record more reliable.

What is a Blockchain?

A blockchain is a decentralized database of data. Whenever a new digital currency is created, that record is placed on the blockchain and the new currency is added to an existing digital wallet that stores that record.