Bitcoin has increased in value, dropped, and increased again over the past few years. Since it was introduced in 2009, Bitcoin has taken investors —and every other person interested in cryptocurrency— on an emotional and financial rollercoaster ride.
Despite its ups and downs in the past few years, Bitcoin has attracted and is still attracting a lot of attention. Most people don’t understand the technology behind Bitcoin, but the stories of early investors are more than enough to convince them to invest or at least consider investing in Bitcoin.
Regrettably, anybody that’s interested in investing in Bitcoin can also be victims of hackers and scammers if they’re not careful enough. Although its privacy and lack of government regulation are benefits, they can also be detrimental in that they allow fraud to be more common.
Common Bitcoin Scams
If you’re looking to invest in Bitcoin, beware of the following Bitcoin scams:
Bitcoin Blackmail Scams
A Bitcoin scam that’s quite popular is the blackmail scam. The procedure is for someone to send you an email talking about how they have access to your phone or computer and have personal information of yours. Many times, the blackmail is usually over something sexual —such as claiming to have sexual pictures or videos of you, which they’ll release unless you transfer some money into their Bitcoin wallet.
To make you believe them, they can even send you parts of your old passwords or a list of your old passwords. Not to worry, they cannot access your emails or other personal information this way and they are just bluffing. The best thing to do will be to report this email.
Bitcoin Ponzi Schemes
Ponzi schemes are the same, whether with regular finance or cryptocurrency. They involve taking money from new investors and paying older investors with it.
In 2019, 3 men were arrested for a $722 million cryptocurrency Ponzi scheme —BitClub Network. The scheme involved investors paying for shares in cryptocurrency mining pools. It also rewarded investors that recruited new investors. The scheme ended with none of the investors getting paid or getting their original investments back.
New Fake Cryptocurrencies
Another Bitcoin scam is to introduce a new cryptocurrency alternative. The scammers usually sell the idea that it’s too late to profit from a matured cryptocurrency like Bitcoin, so it would be better to invest in a new one.
The cryptocurrency, My Big Coin got shut down for this exact reason. Its founders took $6 million from its investors and directed it into their accounts instead of the cryptocurrency.
Fake Bitcoin Exchanges
Another popular Bitcoin scam is creating a false Bitcoin exchange, a cryptocurrency trading platform that takes money from its customers but doesn’t pay them in Bitcoin. To avoid situations like this, use popular, well-known exchanges with an original and stable customer base.
Malware is one of the most popular ways hackers get the passwords they need to steal bank account and credit card numbers. Malware can also be used to access and drain your Bitcoin wallet if it’s connected to the internet and unprotected from such events.
Most times you can download malware from social media, websites, or clicking on links sent in emails. For example, there could be a link to an app that allows you to “mine Bitcoin for free”. If you let it run on your phone or Personal Computer, it will be able to access your data and hack into your wallet.
To avoid situations like this, if you’re unsure about an email or website, try to get in contact with the company. If you can’t find anything about the company on the internet, it’s more often than not malware.
Regular, run-of-the-mill scams have been going on for years and years, but people still fall for them. Imagine someone calls you now and claims to be a government official asking for money. Would you send it? Most people would.
With the advent of Bitcoin, instead of being asked to transfer the funds into a Western Union account, a Bitcoin wallet address is provided for the victim, who transfers the money there.
The only solution to this type of Bitcoin scam is to be careful while receiving calls and be careful not to reveal personal information to the scammers. Government officials won’t call you in such an informal way, and they won’t ask for Bitcoin.
Because such a shocking amount of people fall for these scams daily, the US Commodity Futures Trading Commission has released a guide to making investors aware of the risks of being scammed while trying to purchase Bitcoin and how to avoid them.
Don’t Be a Victim
Bitcoin is a cryptocurrency that is slightly volatile on its own, even without the risk of being scammed. Keep an eye out for signs of the scams mentioned above when you’re trying to invest in Bitcoin or transfer Bitcoin from your wallet. Trust your instincts —if the offer seems too good to be true, it most likely is.