7 common bitcoin scams - and how to avoid them

7 common bitcoin scams - and how to avoid them

Nikhil Ravindran
Updated on 01 August 2023
11 min read

Bitcoin has been a revolution since the day one of its launch in the digital world and a new source of the digital system has opened up! However, not everyone is okay with the digital coin as there is a huge probability that it may end up as a scam business! After being in the industry for a good amount of time, Epixel MLM Solutions made some digging and came up with a useful article that creates awareness about Bitcoin scams. One must be aware of such facts and here we’ll explain about 7 Bitcoin scams you must know about.

The main motto or aim of the scam is to steal money from people around the world by means of fake promises and programs. This article will help you to ring a bell and the so-called “false alarm” must lid up! Scammers usually take advantage of the people’s unawareness, and make them fall into the trap. Let’s have a look on the scam list,

1 - Unverified Bitcoin exchange platform scam

Exchange platform is a multi-currency cross-linked stage where one cryptocurrency is exchanged for another or fiat-cryptocurrency and vice versa. A Bitcoin holder can exchange his/her holding BTC and exchange it. Here you can buy Bitcoins also and add in the wallet. Due to this reason, a scam may result you in losing a large amount of money.

Some exchange may offer you more profit or discounts and you will easily fall for such mesmerizing acts. The security threat is an issue that may collapse the entire system single-handedly. Let us give you the instance where such scam occurred in the past period of time – "Mt. Gox disaster!"

Back in 2010, when Jed McCaleb started an exchange platform in Japan, it became an interesting source of income in the digital world. Here you can buy, and sell Bitcoin and by 2013-'14, about 70% of Bitcoin is in circulation. A security breach changed the fortune of the exchange platform and by February 2014, Mt. Gox has suspended the trading and become a victim of bankrupt. The platform was shut down, and liquidation wiped out it completely. Liquidation is the final step of an organization, and its dead meat after this process. The team has redistributed all the assets and properties, and about 85000 Bitcoins got stoled in this allegation.

Another theory suggests that BTC where lost due to the transaction to the invalid addresses. Also after the breaching issues, BTC value dropped down to the bottom. This failure is considered one of the biggest scams of the era. Lots and lots have lost their money due to this epic scam. A solution is made from the court by appointing an official to look after the debt.

How to avoid BTC exchange scams?
  • Check the authority of the exchange and their exchange procedures closely.
  • The promotions to make you rich - kind of promises are to be noted.
  • Regulations - this part carried a huge role and if not avoid it.
  • The exchange rates must be double checked and make a comparative study.
  • How to deposit the money and the withdrawal norms need to work in parallel without any complexities.
  • Before making the trading in never-heard-before exchange platforms, make sure they are genuine but not fake/scam.

So beware of such situations and make sure you have made a throughout analysis before making the payment or trade in such platform.

2 - Ponzi business – BTC scams

A business that deals through online methods is always a great concern, and this sort of business needs to follow several things. Usually, a business that runs with a digital currency tends to fall under the scam category. Bitcoin after its rise in the value has offered immense business attraction, and several initiatives have been put forward after it.

When such valuable asset combines with a well-recommended business platform then, it’s a huge opportunity. And on the other side of the coin, a dark scenario opens up! A BTC related MLM schemes are already working in progress, and people really enjoy the opportunity. If such platforms offer or promise you with a high return scheme, just don’t fall for it directly. Investors fall for such Ponzi business scams and lose a fortune, without a recovering point. There is no return from that point, recently in a BTC scam; investors have lost about $300 million.

A pyramid model business scheme was introduced by a fake business provider in India, by representing themselves in the name of an organization. With fake promises and high return policies, he created a buzz and then, there are no returns as promised. As per reports, several subordinates got arrested, and still the scam is spreading out like a spider web.

How to avoid Ponzi scams?
  • The easiest method to spot this scam is what they offer - if it's too relied on the money terms then, you may want to avoid it!
  • If the returns are too high - it's a scam too!
  • Avoid unauthenticated business schemes that offer high-profit ratio.
  • Try to spot the uncertainties and understand the scam part.

Never get into such allegations and always be keen enough to understand about the business, its initiative, basic flow, about the organization, etc.

3 - BTC phishing scam

Email marketing is obviously one of the best strategies to advertise your brand as well as to reach out to the public attraction. With attractive email content, information or any updates can be reached out to the public and convert into potential business clients. However, lots and lots of scams involved in this strategy and many scams appear to pull out of this marketing model itself. A user gets attracted to such business emails by means of,

  • New BTC investment opportunity
  • Offers or prices slashes on Bitcoin
  • The account got credited with BTC
  • Trading opportunity with high exchange value etc.

And the main BTC phishing occurs in the case of "You've received BTC coins and login in your wallet to verify it!" All trust gaining aspects will be there in the email, and obviously, you'll fall for it. Alongside with this email, a URL that redirects to your wallet will be there in the email content. And if you click on it and move further, it's going to be a disaster. A new webpage will pop up that carries fake wallet login entry, and if you enter the details, the whole wallet data details will get hacked! You will lose all your current BTC's available in the wallet.

How to avoid phishing scam?
  • Avoid spam emails that offer you attractive BTC discounts etc.
  • Never share your wallet credentials to strangers or outside people.
  • Never share your private key for any purposes.
  • Never click on unauthorized website links as it may grab your sensitive details.
  • Never disclose or provide private details without checking the genuine side of the website or form.

Never get into such scams and make sure about it!

4 - BTC website/offline/physical scam (fake)

The real world never offers anything for free and if any pops up with a ‘free tag' be aware of that website! Nothing in this world is free, and everything comes up with a price tag. Especially in the case of BTC, it’s high in value and always follows a market cap. This isn’t it! Just like the above case, there are plenty of case studies to check for - the fake exchange website, ICO website, ads, etc.

The above case studies always pass through the same website channel and drive in users to the system. Yup, a website is literally the point where everything begins, and as told before, you must be able to differentiate between fake and real! The other scam part is the physical Bitcoin scam, and yes it’s real! A popular website reported news about such scams in Russia. Gypsies are selling Bitcoin outside a local department store by making people believe that it’s in physical form.

How to avoid a physical scam?
  • Bitcoin is not a physical asset and understands this basic fact.
  • Avoid investments in the physical world like local departments stores etc.
  • Offline BTC business via brokers will end up in loss of the good amount of money.
  • Study the present digital scenario and then make the investment.

These false ideas make people suffer a great loss! Be aware of at least what cryptocurrency is and how to invest in it!

5 - Investment/ICO scam

Investment is the ultimate scam, and 90% of the scams do occur by means of this style. Investors predict investment in new cryptocurrency will be a great chance and call it the next Bitcoin of the era! Without much idea about the new altcoin, you make the investment, and you may catch in a scam. Here is a recent report on such scam,

A 22-year old millionaire became a victim of such an investment scam where his loss was high in figures. About 5,500 BTC coins where used to invest on a new coin and got nothing in return. Back in 2017, the millionaire transferred these Bitcoins as an investment for a new digital coin. And good returns are offered for the investment, and he considered this as a good investment. Months went past, and there is no word on returns yet, so he requested an investigation and found this as a scam.

Later on, during the investigation period, they have found out about the group of people who were involved in this scam business. The group has liquidated BTC and deposited money and is estimated to be around $24 million. This scam points out one thing - how far one must be aware of before making an investment on a digital coin? The investigation is going on to find the fraudsters and get back the money.

Yet another sort of scam and yes, ICO is another investment based platform and known as "Initial Coin Offering" or "token sales event". This scam is not that far different from the above-mentioned investment scenarios. It's a scam and stays as a scam! Raising fund with BTC tokens is an effective ICO method, investors follow up a process, and if the opportunity is found perfect then, they make the investment. ICO is the new way of crowdfunding, and as per the digital records, about 90% of the ICO events are fake in nature.

However, with proper research and analysis, you can find bitcoin MLM platforms that integrate intuitive and powerful technologies with flexible investment options.

How to avoid investment/ICO scam?
  • Never fall for false investment schemes which offer you fast returns.
  • Fast cooking investment promises will mesmerize your eyes but, never fall for such fast-growing scams.
  • Crowdfunding is yet another event to make you fall under the investment threat.
  • Before making the investment in a token sale make sure the ICO is valid.
  • Check whether the campaign team is genuine or not before making the investment.
6 - Social media/Malware scams

Promotions are the best way to market your product and business in a steady manner. There is no replacement for such an effective digital marketing process, henceforth the chances for you to fall under the fake wall is high. Social media scams are always on the high note, and it seems to be like – "Use the opportunity, and make good returns", "Get free BTC coins by joining into this scheme", "Make the least investment, and get a regular income without any stress".

A twitter war, Facebook hash tags, trending subjects, etc. deal with these scams and the world together proves to be effective in all sense. Well, this has been considered as - "the dark side of social media". News reports are flying in and out about these instances. Malware URL's are another way of BTC allegation; certain online surveys can also act as malware, and the sensitive data is exposed and explored! Always keep preventive measures and parallelly, a caution alert have to consider when involved in such cases.

How to avoid social media scam?
  • Avoid getting trapped under fake social media profiles and similar scams.
  • Several social media communities or chat rooms remark you with such promises, avoid at any cost.
  • Never download any files from unknown sources attached via email or other media related to Bitcoin.
  • Avoid unknown mining offers before losing your money.
  • An unknown link might take all your valuable assets, so be aware of such instances.
7 - Pump & Dump scam

A marketing idea is usually imposed using the social media platform, the plan will be like – You create a new investment scheme or a new digital coin and make great hype in social media/other sources, make some promises, and high figures offered as returns. Investors make the investment and later on, the market gets increased with the news. It will be like an expert prediction/analysis about a new investment opportunity – the growth will be there in future, etc. With such efforts, the price gets boost up and gains a good return. If this part is carried out with false promises then, it’s a scam! You’ll be trapped if you engage with such strategies and find it the best way to make money.

The "pump" part usually goes in this hype part and "dump" as the investment i.e., you give a hype on new altcoin and later on, they dump the price after meeting a profit point. Well, a group exists – "pump and dump groups", yes they do exist! Let’s explain this group activity,

  • Join in a ‘pump & dump group’, make the initial payment.
  • Group leader or organizer decides the prices of pump & dump respectively.
  • Members make the payment.
  • Pumps up the price and investors from the outside world make a false hope and make the investment.
  • Everyone in the group sells the shares and makes a good profit leaving the outside investors to loss.
  • The dump price reaches at one point; both group members and organizers gain profit.

You understand about the scam only at the end part and you’re doomed!

How to avoid Pump & Dump scam?
  • Never fall for appealing social pump & dump groups that promise high BTC yields.
  • An over hype in a certain community or a group is a suspicious P&D group.
  • Legality is a matter, and you must be aware of such legal issues.
  • Timely advice on the above circumstances will lead you to avoid every scam.

Beware of these scams and always make a good note about it. A deep research always keeps you away from such scams and hope this article covers most of the Bitcoin scam the world is facing nowadays.

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