Bitcoin scam? Here are 3 signs a cryptocurrency investment, ICO or altcoin is a fraud
When perpetrating any quite scam, it helps to maneuver during a area that’s onerous for everyday customers to know. It’s safe to mention digital currencies, that were confusing to start with and currently are available over k completely different varieties, provide fertile ground for fraudsters. One recent scam story creating the news pertains to the aptly-named Confido, a brand new cryptocurrency startup that with success raised over $300,000 in investment cash through AN initial coin giving. Then, in keeping with reports within the Next internet and Iraqi National Congress, the corporate quickly disappeared.
Altogether the startup was ready to raise 3 rounds of capital from unsuspecting investors WHO wished to have a bit of the company’s “trustless written agreement payment answer,” employing a broker referred to as TokenLot. Confido looked pretty legit — it had a leadership team with head shots, and even revealed a pseudo-white paper (which has additionally since been deleted.) however once the perpetrators had the money, in keeping with a TokenLot statement, Confido’s web site, social media profiles and YouTube videos all disappeared, although some pages area unit still visible through internet archives. TokenLot delineated Confido as AN “exit scam,” and aforesaid they're operating with the Federal Bureau of Investigation to spot the thieves. Token didn’t instantly answer Mic’s request for comment.
It’s not the primary ICO that was later unconcealed to be a scam. Earlier this month, a cryptocurrency merchant named Maksim Zaslavskiy was inactive for securities fraud over his affiliation to a series of ICO scams, and on Oct. twenty Bloomberg rumored one more cryptocurrency-related arrest, although therein case the hacker was targeting monetary establishments.
In part because ICOs are largely unregulated, they’re a breeding ground for scams. Back in March, the security research firm ZeroFOX told ZDNet that it had identified some 3,618 such scams associated with more than 100 million different URLs and websites, the most common of which are phishing schemes, attempts to plant malware, and pyramid schemes — in which new investors are constantly recruited to pay off old investors.
Feeling worried? Whether you’re looking to invest in the next hot altcoin — or are simply intrigued by an ad for the new bitcoin wallet — you can protect your money by learning to identify key red flags (beyond just avoiding unfamiliar ICOs). Here are three examples of warning signs that scammers are involved.
1. Dodgy URLsBitcoin scams are constantly coming and going, Bitcoinist noted, so one of the first things you should do any time you’re vetting a new bitcoin company should be to check if you’re using a secure connection.
Luckily, this is pretty easy to do, if the connection in question has been secured the URL will lead with “HTTPS” as opposed to “HTTP,” or some other alternative. You should also be especially wary of any offerings that appear to be selling a digital currency for below its market price. Always double check prices using a more reputable source like CoinDesk or CoinMarketCap to figure out if something might be too good to be true.
Scammers also tend to use online ads to find targets who are typing “buy bitcoin” or “ICOs” into search engines like Google, according to Bitcoinist. Take care to avoid these ads, and always instead make sure you’re clicking on organic links.
2. Tiers that look like a pyramid scheme
One particularly common form of bitcoin scam, according to ZDNet, are Ponzi schemes or Pyramid schemes. Even BitConnect, currently the largest bitcoin exchange according to the New York Times, has been accused of being a pyramid scheme by high profile members of the cryptocurrency world like Ethereum inventor Vitalik Buterin. His reason? Unrealistic, overly consistent promises about returns.
These schemes are essentially where your venture doesn’t actually make a product or any money — they simply continue recruiting new investors to pay back the old ones you’ve already tapped out. A good red flag to look for are “tiered” or “multi-level” marketing arrangements.
The Securities and Exchange Commission has a good list of other red flags of how to recognize a potential Ponzi scheme, but the biggest one is definitely any venture that offers really high returns with little-to-no risk. Generally, high returns are how you compensate people for taking on lots of risk in the first place — anyone claiming you can have both at the same time is probably trying to rip you off.
3. Messages from Netflix or Google — that aren’t
A final common form of scam to keep an eye out for? Phishing scams which reach out to members of the bitcoin community using social media or email, with offers designed to get their personal information or access to their bitcoin wallets.
As with other phishing scams, these hackers usually create a veneer of credibility by attempting to impersonate another brand you actually use, like Netflix or Google Docs. As ZDNet notes, if the thieves in question are after your bitcoin, they’ll probably request that you enter your “bitcoin key” so that they can empty your wallet.
The best ways to avoid being on the receiving end of a phishing scam are to always avoid clicking on links from companies you’re unfamiliar with and triple checking the sender and URL information, even if a firm seems familiar. If you receive an email with suspicious links or that requests your personal information, delete it. And if you simply must investigate the offer, use an outside search engine, since links in emails can easily be disguised.
Altogether the startup was ready to raise 3 rounds of capital from unsuspecting investors WHO wished to have a bit of the company’s “trustless written agreement payment answer,” employing a broker referred to as TokenLot. Confido looked pretty legit — it had a leadership team with head shots, and even revealed a pseudo-white paper (which has additionally since been deleted.) however once the perpetrators had the money, in keeping with a TokenLot statement, Confido’s web site, social media profiles and YouTube videos all disappeared, although some pages area unit still visible through internet archives. TokenLot delineated Confido as AN “exit scam,” and aforesaid they're operating with the Federal Bureau of Investigation to spot the thieves. Token didn’t instantly answer Mic’s request for comment.
It’s not the primary ICO that was later unconcealed to be a scam. Earlier this month, a cryptocurrency merchant named Maksim Zaslavskiy was inactive for securities fraud over his affiliation to a series of ICO scams, and on Oct. twenty Bloomberg rumored one more cryptocurrency-related arrest, although therein case the hacker was targeting monetary establishments.
In part because ICOs are largely unregulated, they’re a breeding ground for scams. Back in March, the security research firm ZeroFOX told ZDNet that it had identified some 3,618 such scams associated with more than 100 million different URLs and websites, the most common of which are phishing schemes, attempts to plant malware, and pyramid schemes — in which new investors are constantly recruited to pay off old investors.
Feeling worried? Whether you’re looking to invest in the next hot altcoin — or are simply intrigued by an ad for the new bitcoin wallet — you can protect your money by learning to identify key red flags (beyond just avoiding unfamiliar ICOs). Here are three examples of warning signs that scammers are involved.
1. Dodgy URLsBitcoin scams are constantly coming and going, Bitcoinist noted, so one of the first things you should do any time you’re vetting a new bitcoin company should be to check if you’re using a secure connection.
Luckily, this is pretty easy to do, if the connection in question has been secured the URL will lead with “HTTPS” as opposed to “HTTP,” or some other alternative. You should also be especially wary of any offerings that appear to be selling a digital currency for below its market price. Always double check prices using a more reputable source like CoinDesk or CoinMarketCap to figure out if something might be too good to be true.
Scammers also tend to use online ads to find targets who are typing “buy bitcoin” or “ICOs” into search engines like Google, according to Bitcoinist. Take care to avoid these ads, and always instead make sure you’re clicking on organic links.
2. Tiers that look like a pyramid scheme
One particularly common form of bitcoin scam, according to ZDNet, are Ponzi schemes or Pyramid schemes. Even BitConnect, currently the largest bitcoin exchange according to the New York Times, has been accused of being a pyramid scheme by high profile members of the cryptocurrency world like Ethereum inventor Vitalik Buterin. His reason? Unrealistic, overly consistent promises about returns.
These schemes are essentially where your venture doesn’t actually make a product or any money — they simply continue recruiting new investors to pay back the old ones you’ve already tapped out. A good red flag to look for are “tiered” or “multi-level” marketing arrangements.
The Securities and Exchange Commission has a good list of other red flags of how to recognize a potential Ponzi scheme, but the biggest one is definitely any venture that offers really high returns with little-to-no risk. Generally, high returns are how you compensate people for taking on lots of risk in the first place — anyone claiming you can have both at the same time is probably trying to rip you off.
3. Messages from Netflix or Google — that aren’t
A final common form of scam to keep an eye out for? Phishing scams which reach out to members of the bitcoin community using social media or email, with offers designed to get their personal information or access to their bitcoin wallets.
As with other phishing scams, these hackers usually create a veneer of credibility by attempting to impersonate another brand you actually use, like Netflix or Google Docs. As ZDNet notes, if the thieves in question are after your bitcoin, they’ll probably request that you enter your “bitcoin key” so that they can empty your wallet.
The best ways to avoid being on the receiving end of a phishing scam are to always avoid clicking on links from companies you’re unfamiliar with and triple checking the sender and URL information, even if a firm seems familiar. If you receive an email with suspicious links or that requests your personal information, delete it. And if you simply must investigate the offer, use an outside search engine, since links in emails can easily be disguised.
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