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What are the main Bitcoin scams and how do you protect yourself against them?

Having reached its highest ever price, Bitcoin is currently in greater demand than it has ever been.

Unfortunately along with that demand has come enormous criminal attention.   This criminal interest has only been heightened by the fact Bitcoin, like all digital currencies, is not backed by any government or central bank, is reliant upon code/software that only a few really understand and can be promoted easily and almost anonymously via the ever-increasing use of social media.

And criminals aren’t finding it too hard to find victims.  Stories about the rapid increase in the value of Bitcoin have been widespread and many can only see the currency's value rising further still.  The truth however is somewhat different, fluctuations in the value of digital currencies are often much more pointed than with the more traditional international currencies and patterns are harder to predict as so few people actually understand the drivers.

We became aware of Bitcoin scams very early on and as such soon developed a good understanding of the different types of Bitcoin scams and how best to deal with them.

As lawyers we specialise in litigation and in resolving disputes for a variety of clients both in Britain and internationally.  Given many of our clients are extremely entrepreneurial by nature some had bene tempted by the opportunities offered by cryptocurrencies.  Unfortunately some had found themselves affected by the different types of scams and we would like to outline some of the most popular:

1 Malware downloads

Hugely attractive Bitcoin transactions are often used to persuade you to download damaging software that immediately damage or lock your computer.

2 Bitcoin phishing impersonators

Criminals use the Bitcoin logo to gain a victim’s trust and credibility.  Once they have achieved the required level of trust, a phishing website entices users to enter their private Bitcoin key to see if it exists in their database. The key is then phished and the impersonator can then empty the associated bank account/s.

3 Bitcoin-flipping scams

These scams offer to either instantly exchange Bitcoins once you’ve paid a joining fee or promise to double any investment your make within a very short time-frame.  However the promises are never fulfilled and the victim’s Bitcoins are simply stolen.

4 Bitcoin pyramid schemes (also known as Multi-Level Marketing or MLM Schemes)

These are one of the hardest scams to recognise and can be a longer play for the scammer but they will still end up with the victim’s Bitcoins being stolen.

They are based on providing high yield investment programs starting with a typically low initial investment which the scammer promises will be multiplied when the victim signs up more investors by forwarding links to their contacts.  Once there are a few hundred victims signed up – and once a few hundred joining fees have been collected – the originator walks away with the money and the pyramid collapses.

5 Fake Cloud Mining Services

Bitcioin mining is a legitimate process in which Bitcoin “miners” validate transactions in the blockchain and make sure no double spending can occur by applying some complicated mathematical equations in exchange for new Bitcoins.

Calling in a miner negates the need for the user to have to purchase expensive Bitcoin mining hardware, a trade-off scammers have been quick to pick up on.  Scammers are now collecting the ‘mining fees’ without actually doing any mining and, although they will generally pay out small amounts for a limited period after a mining contract has been secured, the payments soon dry up and the scammer disappears with the funds.

6 Bitcoin Investment Schemes

Bitcoin investment scams promise high levels of return in return for providing ‘investors’ with the capital they need to trade digital currencyLike cloud mining scams they will pay out small daily returns until one day the payments stop and the scammer runs off with all of the funds the victim has invested (funds that will probably have been increased over time as the initial daily payments will have been attractive enough to persuade investors to re-invest their returns into the scheme).

The first a victim will know problems usually start when the victim tries to withdraw funds soon find the scheme has folded and the organisers are no longer contactable.

7 Fake Exchange Scams

Legitimate Bitcoin exchanges provide users with a marketplace to trade Bitcoin for either international currencies or other cryptocurrencies. Somewhat predictably fake exchanges are now starting to spring up.

These fake exchanges will ask users to deposit funds to be used to purchase Bitcoin, drawing victims in by promoting lower transaction fees than regular exchanges or even credit cards.  The only problem is, as these exchanges aren’t real, the transaction will never generate any return for the user.

8 Bitcoin Donation Scams

This is arguably the most cynical type of scam as it plays on the victim’s emotions and compassion.

In the wake of recent atrocities we are seeing more and more examples of scammers creating fake donation pages asking people to donate in Bitcoin rather than via better policed platforms like PayPal.

So what do you need to do to protect yourself?

There is a basic rule when it comes to protecting yourself against scams – if it looks too good to be true, it probably is!

Digital currency and Bitcoin scams are no different.  If someone sends you any offer that looks too good to be true, immediately be on your guard.However here are 4 basic rules you should always follow:

  • Never trust any unsolicited email or social media post claiming it will give you or help you mine Bitcoin.

  •  Never click on any URLs offering Bitcoin offers unless you know and trust the sender (and know that the social media account it has been sent from is 100% genuine.

  • Never engage with or provide personal information for any email or social media account of any Bitcoin brokers or trading platforms without checking they are 100% genuine in case they are an impersonation.

  • Never enter into any type of financial transaction on the back of a direct message on social media.

If you have been the victim of a scam involving Bitcoin or any other cryptocurrency or have received an approach via email or social media you think maybe be fraudulent, you need to act quickly.  Please call us on 020 7792 5649 or email This email address is being protected from spambots. You need JavaScript enabled to view it..

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