Bitcoin Scams

Bitcoin has been a volatile subject in recent years, both literally and figuratively.

As an alternative currency to national standard currencies around the world, like the dollar, Bitcoin is a volatile topic, dividing most people into advocates, skeptics and naysayers.

In terms of Bitcoin’s actual value, it’s also been a volatile ride since the cryptocurrency’s 2009 introduction, first skyrocketing in value before crashing back down to earth. 

The massive, widespread awareness of Bitcoin’s existence paralleled with a massive, widespread unawareness of what, exactly, Bitcoin is and how, exactly, it works, makes prime fertile ground for scammers to take advantages of innocent people.

Add to that the unregulated nature of Bitcoin and it could be a recipe for personal financial disaster.

Read on to learn how to identify and protect yourself from Bitcoin scams. 

What Are Bitcoin Scams & How Do They Work?

Before getting into what Bitcoin scams are, let’s first get clearer on what Bitcoin is itself. Bitcoin is a cryptocurrency, or digital alternative to standard currency.

Rather than being valued according to any standard, like the dollar, it is valued according to what investors believe it’s worth at any given point in time.

In 2017, Forbes described Bitcoin as a locked moneybag, with the code to unlock it provided to the holder of Bitcoin.

Another way of viewing it is that the Bitcoin is the code itself. 

Most Bicoin scams appeal to people’s greed, or at least their anxiety about scarcity and fear of survival. Think of them as the latest incarnation of the “Get Rich Quick” scheme. 

Common Types of Bitcoin Scams

Since Bitcoin scams come in many forms, the best way to clarify more fully what they are and how they work is to lay out the most common of these forms.

Fake Bitcoin Exchanges

Fake Bitcoin exchanges present themselves to victims as real brokerages and trading platforms where Bitcoin is legitimately exchanged. They try to solicit your business as an investor in Bitcoin through their exchange.

Typically, they promise large returns for little-to-no risk and appeal to your desire to be one of the “little guys” playing with the “big boys.” They convince you to deposit some sum, and then walk away with it. 

Fake Cryptocurrency Scams

In this type of scam, a fraudster will try to sell you on a more lucrative and inexpensive alternative to Bitcoin, suggesting that, if you haven’t already made money in Bitcoin, you’ve already missed the boat.

But, they go on to say, it’s not too late to take advantage of this new alternative. You simply invest in this new alternative, and then never see that money again. 

Ponzi Schemes

Also commonly known as pyramid schemes, this one of many traditional scams adapted to the Bitcoin era.

With this scam, you are enticed to become an investor in a program through which, rather than making money off of any actual instrument (such as the rising value of Bitcoin over time,) you make money off the subsequent investors to follow you into the investment.

Unfortunately for you, Ponzi schemes are devised such that only the few people at the very top of the pyramid actually ever make any money. 

Malware Scams

Another common old school scam given a Bitcoin spin, malware scams involve attempts to fool you into clicking a link or opening an attachment that ends up downloading and installing malware onto your computer or device.

This malware can come in many forms, including:

  • Keyloggers and other spyware – Track your actions and attempt to collect personal information, like passwords. These scammers lure you to click the infected link or download the infected attachment with promises of information on how to make money with Bitcoin.
  • Ransomware – Lock up your computer or device pending your payment of a ransom, in this case in the form of Bitcoin.

Another type of Bitcoin malware scam targets existing holders of a Bitcoin wallet, a digital instrument accessible online. Here, the goal of the spyware or other malware installed is to access that Bitcoin wallet and drain it of funds. 

Government Authority Scams

Yet another old scam made anew with Bitcoin, this scam involves a fraudster pretending to be from the IRS or other government body claiming that you owe the government money and must pay immediately under penalty of imprisonment or other dire consequence.

The fraudster, then, instructs you to pay this amount by Bitcoin in order to avert immanent disaster. Know that no government will ever ask you to pay money owed using Bitcoin. 

Red Flags to Look Out For

Unless you are already a Bitcoin buyer or seller, be suspicious of absolutely any communication related to bitcoin including:

  • Email
  • Text
  • Phone call

If you have not explicitly reached out for information on Bitcoin or ever initiated a Bitcoin transaction, there should be no reason whatsoever for anyone to contact you regarding anything having to do with Bitcoin. 

If you have ever bought, sold or inquired about Bitcoin, then, first and foremost, consider the source of any unfamiliar and unsolicited communication you receive involving it.

Does the correspondence come from a recognized, familiar or properly licensed/authorized/certified source (ie. bank, credit union, brokerage?)

Most of all, always remember the old tried and true rule: “If it seems too good to be true, chances are it is.”

Tips on How to Protect Your Information

If you are ever unsure of the legitimacy of any company contacting you, conduct your own research on that company before giving them any personal information or money or clicking on any links or downloading any attachments they provide.

Research the company with the Better Business Bureau and the Chamber of Commerce in whatever locality they purport to operate. 

Additionally, if you’re unable to find contact information for the company through a reliable independent source, consider that another red flag warning against doing business with them. 

Summary & Specific Resources

If you believe that you were the victim or attempted victim of a Bitcoin scam, contact:

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