Top 10 Bitcoin Scams to Avoid

By Crypto News Australia August 14, 2023

As Bitcoin has attracted a lot of attention over the years, scammers have found ways to trick people in into separating victims with their cryptocurrency through a variety of methods. As reported by the Guardian newspaper recently we have seen Australians fall victim to a number of different scams.

Types of Bitcoin scams:

In an online world where the internet provides an excellent platform for people to use technology with good intentions, the internet also provides a platform for people to use technology with bad intentions.

Recent scams examples in the news:

Scams of various types have existed before the internet, but in the technological age that we are in now, the internet provides a convenient platform for fraudsters to take advantage of people.

What is internet fraud?

“Internet fraud is a type of cybercrime fraud or deception which makes use of the Internet and could involve hiding of information or providing incorrect information for the purpose of tricking victims out of money, property, and inheritance.” – Source: wikipedia.org/wiki/Internet_fraud

In this article, we will be explain how to identify and avoid the most common Bitcoin scams that fraudsters are using these days.

1. Fake Exchanges and Wallets

Fake Bitcoin exchanges act as a reputable exchange platform that put on a front to separate consumers from their hard-earned money. They will normally bait consumer by enticing consumers with promotional offers along with pressuring consumers to create accounts and deposit funds.

Other scammers have directed their attention to developing sophisticated fake wallet applications which can steal critical information such as personal and account details. These apps even are available on official application stores like Google play.

How to Avoid Fake Exchanges and Wallets

Majority of scams have been discovered online through emails and pop ads. To avoid scams, you should check reviews on unknown companies along with social media accounts and the registered business address.

2. Bitcoin Blackmail Scams

Bitcoin blackmail scams can sometimes come in the form of unsolicited emails, claiming to be a hacker that has your details and embarrassing evidence that would be very personal to the victim. Most Bitcoin blackmailers lie their way through the process to gain valuable information from the victim but mainly bitcoin. These emails would often include content that has been worded to make you feel scared, anxious, and worried in order to pressure you into giving them your bitcoin.

Another way blackmailers would steal information is pretending to be the tax office, claiming that the victim didn’t pay their taxes so that they can receive information and money from their target.

How to Avoid Blackmail Scams

The best thing to do when you receive a blackmail scam is to report it and block the email. You should also check the sender’s email for spelling mistakes and suspicious attachments. Sometimes the emails can look quite convincing, but you should remember that most established companies or organisations will not email you about outstanding taxes, but may contact you via alternative methods.

3. Impersonation Giveway Scams

Scammers would act as a celebrity giving out a large sum of cryptocurrency to lure their bait in and capture sensitive information from the victim.

They would normally rush their victims into a bad decision by making them think they’re missing out on a good deal, then using fake accounts and bots to pretend as if people are receiving the money to gain the victims trust. Additionally, fake giveaway bots would often obtain a blue verified mark on their social media profile to make their giveaway look more legit and trustworthy.

How to Avoid Giveaway Scams

Impersonation giveaway scams can be difficult to spot.Make sure to look for inconsistencies within the giveaway and check their followers on social media. You can also check if their social media account has a verified tick. It’s also worth checking if another profile already exists with the same name as they could be impersonating either a person or a company.

If something is too good to be true, then it more than likely is.

4. Ponzi/Pyramid Schemes

A Ponzi scheme is a simple but alarmingly successful fraud that lures the prospect with extraordinarily large returns for new investments. A promoter would normally tell other people to invest in their scheme, initially investors receive returns but in factare just pay-outs from money deposited by newer investors.

Eventually, the Ponzi scheme will collapse, and this is when the perpetrator runs off with the money or when it becomes too difficult to gain new investors.Most people will jump to the opportunity of market returns but there is always a twist behind Ponzi schemes.

How to Avoid Ponzi Schemes

Avoid someone who tries to sell on an investment that promises high returns and little risk which could well involve fraud. Furthermore, be vigilant about someone unexpectedly contacting you about investments or promises of money behind a business plan because this is often a clear red flag.

5. Exit Scams

If you have been following cryptocurrency for a while, then you may have heard of ‘Exit Scams’ in relation to cryptocurrency. This is essentially a fraudulent operation that is conducted by unethical promoters who build up hype and interest for a new cryptocurrency project. They would then simply disappear with the investor’s funds either during or after the initial coin offering.

“An exit scam is a confidence trick where an established business stops shipping orders while continuing to receive payment for new orders.” – Source: wikipedia.org/wiki/Exit_scam

As with anything you plan on investing in, it’s important to do your research and find out as much as you can about the potential project. If insufficient information is available about the new cryptocurrency, then perhaps it could be a sign that it’s not a worthwhile investment.

How to Avoid Exit Scams

Unrealistic profit projections and claims that seem too good to be true should be taken with a huge grain of salt. Whilst it may be tempting to not miss out on such an opportunity, you should also trust your gut instinct.

You should also examine their white paper as it’s a key document that explains what the company is aiming to achieve with the new cryptocurrency. A vaguely written white paper with no clear aims or objectives is a clear sign.

6. Romance Scams

Online romance scams can be quite complex as it’s psychological and there are several stages that a scammer needs to go through before they are able to take advantage of their victims.

“A romance scam is a confidence trick involving feigning romantic intentions towards a victim, gaining their affection, and then using that goodwill to commit fraud.” – Source: wikipedia.org/wiki/Romance_scam

In an online romance scam, the fraudster will make contact with their victim through online means, such as social media, dating apps, and emails.

The scammer will usually create fake profiles and use photos and information from another person. They are essentially taking on a fake identity in order to take advantage of unsuspecting people.

The romance part of the scam happens after initial contact has been made. Once the scammer has begun talking to the victim, they will shower an abundance of compliments and affection to make the victim emotionally connected. Once the ‘relationship’ has progressed, the scammer will then ask the victim for money.

How to Avoid Romance Scams

There are clear signs when you might be the target of a romance scam, including the following:

The person shows excessive affection after brief conversations.
The person does not want you to share information about them to your friends or family.
There are inconsistencies with information about their details.
The person will make up all kinds of excuses to avoid meeting up face-to-face or having face calls.

If you suspect you might be a victim, simply perform a reverse image search on the person’s picture. A search engine will then search the web for this exact image and it will bring up results if there are duplicates.

If you’re ever unsure about someone, always ask questions.

7. Money Mule Scams

Unfortunately, online scams can also get quite dangerous, such as the ‘Money Mule’ scam. This scam could get you into legal trouble as you would be helping a fraudster to move stolen funds. Scammers will try and trick unsuspecting victims into helping them move stolen money after promising that the victim will be rewarded. There are several versions of this scam and it can be in the form promising a relationship, a job, a prize, or even just money.

“A money mule, sometimes called a “smurfer,”[1] is a person who transfers money acquired illegally (e.g. stolen) in person, through a courier service, or electronically, on behalf of others.” – Source: wikipedia.org/wiki/Money_mule

The premise of this scam is to trick you into believing that you will get something by helping the scammer. The fraudster would send money to you and then ask you to send some of it to another recipient. They won’t tell you that it’s stolen and they will lie about the reason for sending this money.

The scammer will often ask you to move this money via cheque, gift cards, or wire transfer. If you do deposit the fraudster’s cheque then it may clear at first, but it will later be found as a fake cheque. The bank will then need you to repay that amount.

How to Avoid Money Mule Scams

Don’t send money in order to collect a prize – This will always be a scam and they might be trying to trick you into moving stolen money.

Ignore emails asking you to transfer money – Scammers will often ask people to send money to a ‘supplier’ or a ‘client’ and they will tell you that you can keep a part of that money.

Never send money to a ‘love interest’ that has sent you money – Similarly to the romance scam, these scammers will promise a relationship once you send them money.

8. Fake Mobile Wallet Applications

As cryptocurrency has seen a massive surge in popularity, it’s no surprise to see that there are plenty of cryptocurrency-related mobile apps available. From mobile wallets to market trackers, there is a range of mobile apps available for download that are relevant to cryptocurrency.

One of the ways that scammers take advantage of this, is that they will create fake applications that can either pose as a legitimate app. They can then obtain your details if you download the app and login with your information. Some of these apps may even install hidden malware or viruses onto your phone.

Whilst the Google Play Store and Apple App Store has processes in place to mitigate this issue, some apps can get past this. These apps do have a short shelf-life as they get detected rather quickly, but within that short time frame and given the amount of mobile phone users, many unsuspecting people could fall for this trap.

How to Avoid Fake Mobile Apps

Check Reviews – Newly published apps will have little to no reviews and this can be a sign. Check back a few weeks later to see if the app has been removed or if the reviews have started building up.

Download from Trusted Sources – Some people may download apps from websites and other sources, but try and stick with official outlets as they have processes in place to block most of the fraudulent apps.

Ignore Links, Emails, or Pop-ups – Sometimes, you can get emails, links, and pop-ups that advertise a new cryptocurrency app. Whilst not every one of these are fake, it’s best to avoid downloading the apps by clicking on the links. Go directly to the website in question to check the validity of the advert.

9. Cryptojacking

Cryptojacking refers to a scam where scammers would use your computer’s processing power to ‘mine’ cryptocurrency (without you knowing). Cryptojacking can happen just by visiting a website as scammers can install malicious code. As cryptojacking is relatively hidden, it can be quite hard to detect whether a website or an application is taking advantage of your processing power to mine cryptocurrency.

There are a few signs that you should keep an eye out for in case you suspect that you are being cryptojacked:

Your computer or mobile device is running hotter and louder than usual when visiting a website.
Your mobile device is draining the battery quicker when visiting a website or using a lightweight application.
Your computer or mobile device is experiencing regular crashes when using a website or application.

How to Avoid Cryptojacking

If you do notice any of the above, then you should close the website or app that is causing the issues above. If that resolves the issue, then the application or website is the problem at hand.

Ensure that you have up-to-date antivirus on your computer and on your mobile device. Do not install software that you don’t trust or has no reviews.

Avoid clicking on links that you do not know where they lead to. Always take caution when visiting an unfamiliar website.

10. Automated Bitcoin Trading Scams

While there are a lot of legitimate automated cryptocurrency trading systems on the market, there are also fake trading systems that are designed to separate victims from their money. Some automated systems promise high profits all for a low price, and sometimes even for free.

“An automated trading system (ATS), a subset of algorithmic trading, uses a computer program to create buy and sell orders and automatically submits the orders to a market center or exchange.” – Source: wikipedia.org/wiki/Automated_trading_system

In order to attract potential victims, the scammers would make ludicrous claims and promise high returns from using their automated cryptocurrency trading system. If the scammers are able to promise such high returns by using their method, why would they need to sell this product to you, instead of using the product for themselves?

How to Avoid Trading Scams

Research as much as you can – As with anything, before you invest in a trading system, you should research about the software and the company. If little information is available about the product or the company then this could be a red flag.

Look for reviews – See what other traders think of their product and if they have been able to achieve the same returns as promised. Keep in mind that some people might buy fake reviews just to make their product look good, so it’s not always a good idea to rely purely on reviews.

Do they offer a trial? – Most legitimate trading software would offer a free trial and will allow you to test their product.