The Anatomy of Bitcoin Fraud

The Anatomy of Bitcoin Fraud

According to a Chainanalysis report, in 2021 alone, scammers stole a record $14 billion worth of cryptocurrency. If you think that this year will be an exception, then you are deeply mistaken.

According to there are more than 10,000 types of cryptocurrencies in the world, and it is logical that this becomes a field of activity for crypto-scammers. But it`s not about that, it`s about how to get into their networks. And so, let’s analyze the most famous of their tricks.

  1. Downloading malware

Bitcoin is often used as bait to lure people into downloading malware that can infect their computers. Therefore, it is important to be careful about any attachments or links in the email, as they may later become an attempt to download an application infected with malware. Follow links only from trustworthy sources.

  1. Websites that look “too good to be true”

While looking at potential investment opportunities, take a step back and evaluate the website. Does it look like someone created it in five minutes? Are there grammatical and spelling mistakes? Isn’t the design unprofessional? All these are alarming signals that should make you think twice before investing money.

Another way to check if a site is legitimate is to see if it has a physical address, contact information, and customer service options. Many fake sites do not have any of this, as scammers try to remain anonymous.

  1. Lack of transparency

A great way to determine if a site is legitimate is to see how transparently they talk about their team, long—term goals and roadmap. If they don’t have such information freely available, look for reviews about the company on the Internet. If you don’t find any, or you find bad reviews in which the company is called fraudulent, this is another alarming sign.

  1. Bitcoin Phishing: Impostors

Although blockchain networks are generally decentralized, that is, no entity can own the copyright and branding of a cryptocurrency like Bitcoin, not everyone knows about it. Imposture is widespread on social networks, and impersonating the Bitcoin brand is not uncommon. Moreover, it is possible to imitate well-known personalities associated with cryptocurrencies and spread fraud through them.

Such scammers create a fake account on social networks or a website that looks very similar to the official page. They can even use the same logo and branding. Their goal is to deceive people and make them think that they are dealing with a real account, when in fact this is not the case. They lure users to enter their private key or secret phrase on a fake website, giving scammers full access to the victim’s funds.

In addition to imitation, even legitimate accounts are hacked and used to spread fraud. In 2020, the Twitter accounts of various celebrities and political leaders, including Elon Musk, Bill Gates, Jeff Bezos, Barack Obama, Warren Buffett and others were hacked, offering users to double their investments by sending funds to help in the fight against COVID19. More than 130 accounts, including brands such as Apple, Uber and CashApp, have been affected by this social engineering attack.

  1. Bitcoin Transfer Scams

These scammers often claim to provide a service that instantly exchanges your Bitcoin for money, but only after paying the initial fee, while promising to double your initial investment. The attacker usually demands that you send him your coins first, claiming that he will send back double the amount. Of course, after sending the money, you will most likely never hear about them again.

  1. BTC Pyramids

These scams are usually difficult to recognize because they rely heavily on yield investment programs and multi-level marketing (MLM). Although MLM projects are not illegal everywhere, they are in an ethical gray area where small investments can be multiplied by attracting additional participants through referral links.

This can quickly turn into an endless cycle where everyone is trying to make money on each other, while no one is producing anything of value. Eventually, the fraudster disappears and the pyramid collapses.

Examples of known fraudulent Bitcoin sites

  • Fake Crypto Assets: My Big Coin

At the beginning of 2018, the company My Big Coin (MBC) lured investors and forced them to invest $ 6 million in an absolutely fake cryptocurrency. It was later sued by the U.S. Commodity Futures Trading Commission, according to a case brought by CTFC. My Big Coin did this by transferring customer funds to personal bank accounts and then using them for personal expenses, including the purchase of luxury goods. Randall Crater, the founder of My Big Coin, was later arrested, and the lawsuit was claimed as one of the first in American history.

  • Bitcoin Ponzi Schemes: Bitcoin Savings & Trust, Mining Max and BitClub
  1. Bitcoin Savings & Trust

Trendon Shavers managed this Ponzi scheme, which turned into one of the most notorious cases of fraud using a fake ICO (Initial Coin Offering). ICO is when new projects sell their tokens to raise funds. Investors in BS&T were promised a high yield of ~7% per week. However, more than 265,000 BTC were stolen. Trendon Shavers was later ordered to pay a $40 million fine and sentenced to almost two years in prison.

  1. Mining Max

The South Korean Mining Max website was not registered with the US SEC, but the site promised investors daily profits in exchange for investments and commissions for attracting other people to invest. For comparison, the site asked people to invest $3,200 to receive a daily ROI for two years, and $2,000 commission for each personally attracted investor.

  1. BitClub

BCN was a very complex scam, which in five years (from April 2014 to December 2019) earned more than $ 722 million. Clients were asked to invest in BCN mining technology, and the project claimed to give investors a share of the profits from Bitcoin.

In 2019, the US government arrested the group running the BitClub Network (BCN) scam. It was said that by paying the $99 entry fee and $500 for joining the mining pool, you can relax and receive rewards. However, BCN did not mine the advertised BTC, but instead provided fake mining data to investors.

  • Fake Crypto Exchanges: BitKRX

BitKRX was a fake crypto exchange in South Korea. In 2017, it claimed to be a branch of the legitimate Korean stock exchange KRX and KOSDAQ (trademark KRX). Users gradually began to report the theft of money, noticing that the Bitcoins they had purchased were mysteriously disappearing. There are no additional details about how the crypto assets were stolen.

  • Malware and Viruses: Cryptocurrency Clipboard Hijackers

Cryptocurrency Clipboard Hijackers is one of the clearest examples of malware fraud, the creators of which stole at least $24 million in cryptocurrency by taking possession of the victim’s clipboard. In this case, the attacker monitored the victims’ clipboard for specific content, such as wallet addresses and private keys, and then used this information to steal funds.

  • Bitcoin Gold Scam:

Although Bitcoin Gold was a legitimate crypt, the scammers created a site that looked authentic, called . He offered users the opportunity to create Bitcoin Gold (BTG) wallets. In 2017, this project lured $3.2 million from investors by using links that allegedly led to a legitimate Bitcoin Gold website to force investors to share their private keys.

Other Types of Crypto Scams

In addition to the aforementioned scams, there are other types that are popular in the space. Some of them include:

  • Fraud in DeFi

DeFi protocols have become popular among developers and investors who want to make a quick profit. However, some of these projects turned out to be scams. As soon as investors receive sufficient capital from early investors and promises of future growth, the team behind the project disappears with all the money, not planning to fulfill their promises.

  • Social networks and fake apps

Scammers often use social media platforms to spread fake news and ads to lure new investors. They steal information by creating fake profiles, placing ads with offers involving the payment of money or cryptocurrencies, cashback offers through fake shopping sites, etc.

  • Substitution of SIM cards

SIM card swapping scams are another way for hackers to gain access to your crypto wallet funds. They get personal information such as email address, phone number, and even home address through social media before identifying a wireless service provider and transferring your number to another SIM card. This leads to the fact that they gain access to your crypto wallet and siphon funds.

How to avoid fraudulent websites?

Now that you know about some of the most popular types of crypto scams, you may be interested in knowing how to avoid it yourself. Here are some tips:

  • Be attentive to fake news and ads: scammers often spread rumors or make false announcements about projects in order to attract investors. Do your own research and invest only in projects that you are confident in.
  • Check the website URL: Be sure to check if the website URL is legitimate and not a fake version of the real one. Also make sure that your connection to the site is secured using HTTPS, not just HTTP, and pay attention to resources with SSL certificates, as they are more likely to be legitimate.
  • Avoid clicking on links from unknown sources: be wary of clicking on links from unknown or unreliable sources, as they may be malicious. If you are not sure about the site, do a quick Google search to find out if there have been any reports that this is a scam.
  • Do not share personal information: Be careful when sharing your personal information, such as your home address, email address, or phone number, with anyone on the Internet. Fraudsters can use this information to steal your identity or gain access to your accounts.
  • Study the project: before investing in any cryptocurrency project, be sure to do your own research. Check the team members and their biographies, read the technical documentation and look for feedback from other investors.
  • Use reliable wallets and exchanges: When it comes to storing your cryptocurrencies, always use reliable and well-known wallets or exchanges. They provide the best security measures to protect your funds from hacking.

In conclusion

Summing up, it should be recalled that cryptocurrencies are risky investments, and as their popularity grows, scammers have opportunities for quick earnings. However, being aware of the types of fraud, using our advice and taking precautions, you can be sure that you will not become a victim.