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.
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.”
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.
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.
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.
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