Bitcoin, launched in 2009, has changed how we think about money by introducing a digital currency not controlled by banks or governments. However, it has also attracted scammers who come up with new ways to trick investors.
In this guide, we’ll give you essential tips to spot and protect yourself from Bitcoin scams.
Key Takeaways
- Unrealistic Promises: Be wary of offers guaranteeing high returns with little to no risk.
- Pressure Tactics: Scammers often create urgency, pushing for quick investments.
- Opaque Information: Legitimate services are transparent; scammers hide or fake their details.
- Personal Information Requests: Be cautious of unsolicited requests for private keys or personal data.
- Suspicious Links and Websites: Check for misspellings in URLs and ensure sites use secure connections (https).
- Unsolicited Offers: Scams often come as unsolicited emails or messages with promises of easy wealth.
Bitcoin Scams 101
Today, Bitcoin is a leading digital currency, offering a decentralized way to handle money outside of traditional banks. However, its popularity has also attracted scammers.
Bitcoin's features, such as anonymity and no central control, attract both genuine users and fraudsters. This makes it important to understand Bitcoin scams and how to protect yourself from them.
Phishing Attacks

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One of the most prevalent forms of Bitcoin-related fraud is the phishing attack. Phishing is a deceptive practice where scammers masquerade as trustworthy entities to lure individuals into providing sensitive information.
In the context of Bitcoin, these scams often involve fake websites or emails that mimic legitimate exchanges or wallet services. Unsuspecting users, thinking they are logging into their accounts or updating their information, inadvertently hand over their login credentials, wallet keys, or personal data to scammers.
Of course, the outcome of this can be disastrous, as this information is then used to drain their Bitcoin wallets or commit identity theft.
The sophistication of these phishing attempts can vary, but they often employ persuasive language, urgent calls to action, and seemingly legitimate links that lead to expertly crafted fake websites.
Fake Exchanges and Wallets
The lure of low transaction fees or promises of enhanced security can draw users to fake exchanges and wallets. These platforms are set up with the sole intent of scamming people.
They may offer services to trade or store Bitcoin, but once a user deposits their cryptocurrency, the operators abscond with the funds, leaving victims with no means to reclaim their digital assets.
These fake platforms can be particularly convincing, with professional-looking websites with functionalities that mimic reputable cryptocurrency service providers.
Ponzi Schemes
Another form of Bitcoin scam is the Ponzi scheme. Ponzi schemes are investment scams that pay returns to earlier investors with the funds collected from newer investors rather than from any actual profit earned.
In the Bitcoin sphere, these schemes often manifest as investment opportunities promising high returns for depositing your Bitcoin. Initially, returns are paid out to earlier investors to lend the scheme an air of legitimacy.
However, as with all Ponzi schemes, they inevitably collapse when the flow of new investors dries up, leading to substantial losses for most participants. Two of the most infamous Bitcoin Ponzi schemes are Bitconnect and OneCoin.
Bitconnect (2016-2018): Bitconnect promised high returns through a lending program. Investors were encouraged to lend Bitcoin in exchange for Bitconnect Coin (BCC). The platform collapsed in 2018, causing investors to lose $2.4 billion.
OneCoin (2014-2017): Marketed as a cryptocurrency, OneCoin sold educational packages and promised high returns. In reality, there was no blockchain behind OneCoin, making it a complete scam. Authorities estimate investors were defrauded of approximately $4.4 billion.
Fake ICOs
Initial Coin Offerings (ICOs) are a fundraising mechanism for new projects where investors can purchase tokens in anticipation of a project's launch. However, the unregulated nature of ICOs has paved the way for scammers to create fake ICOs for non-existent projects or technologies.
These scammers create elaborate whitepapers and marketing materials to sell tokens for these phantom projects, disappearing with the investors' funds once they have collected enough money.
A good example of a fake I.C.O. was Pincoin and iFan's scam in 2018. This scam raised $660 million from around 32,000 investors. Pincoin and iFan, run by Modern Tech in Vietnam, promised high returns but disappeared with the funds, leaving investors with worthless tokens.
Ransomware and Malware
Ransomware and malware represent a more direct attack on users' digital lives. These malicious software programs are designed to infiltrate systems, encrypt files, or seize control of computing resources.
Here are two good examples of ransomware scams:
CryptoLocker
CryptoLocker, a notorious ransomware, surfaced on September 5, 2013, via a Trojan horse. It infiltrated Windows systems through malicious email attachments. Once activated, it encrypted files and demanded a ransom in Bitcoin for the decryption keys.
The severity of CryptoLocker was substantial, affecting over 250,000 systems within a few months. The estimated total ransom payments reached $3 million before law enforcement shut it down in 2014.
WannaCry
Another significant ransomware cryptoworm targeted Microsoft Windows users in May 2017. Exploiting a vulnerability in Windows systems, it spread rapidly across 150 countries, encrypting files and demanding a Bitcoin ransom.
The malware, also known as WannaCry, primarily affected critical sectors like healthcare and finance, causing widespread disruption. The NHS in the UK was severely impacted, leading to canceled appointments and delayed treatments.
WannaCry's impact was profound, with estimated damages exceeding $4 billion globally. Efforts to curb its spread involved patching systems and developing decryption tools.
From the examples, the scammers demanded the victims pay a ransom in Bitcoin to regain access to their files or systems. This form of scam exploits the irreversible nature of Bitcoin transactions, ensuring that once the ransom is paid, there is only one way to retrieve the funds if the scammers uphold their end of the bargain.
Famous Bitcoin Scams

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Bitcoin scams are no joke; those who have fallen victim understand the pain that comes with it. The Mt. Gox hack and the Bitconnect scheme are two of the most infamous incidents in the cryptocurrency world, both serving as stark reminders of the risks associated with digital assets.
Mt. Gox Hack
Mt. Gox, based in Tokyo, was once the world's largest Bitcoin exchange, handling over 70% of all Bitcoin transactions worldwide by 2014. However, its prominence made it a prime target for hackers.
The attack on Mt. Gox wasn't a single event but rather a series of breaches that ultimately led to its downfall. The most significant blow came when it was discovered that around 850,000 Bitcoins, worth approximately $450 million at the time, had gone missing.
Investigations revealed that the platform had been suffering from a vulnerability known as transaction malleability, which attackers exploited to withdraw funds repeatedly.
What compounded the problem was Mt. Gox's lack of proper accounting and security measures, which allowed the thefts to go unnoticed for years.
The aftermath of the hack was catastrophic. Mt. Gox filed for bankruptcy in February 2014, and the Bitcoin community was left reeling from the impact, with trust in cryptocurrency exchanges hitting an all-time low.
The event triggered calls for better security and regulatory measures in the cryptocurrency industry. Years later, efforts to compensate affected users are still ongoing, and the incident remains a cautionary tale about the importance of security in the digital asset space.
Bitconnect Scheme
Another well-known Bitcoin scam is Bitconnect. Bitconnect promised users exceptionally high returns through a lending and exchange program. It claimed to use a trading bot that exploited the volatility of cryptocurrencies to generate profits, promising up to 40% returns per month.
Users were encouraged to lend their Bitcoin in exchange for Bitconnect Coin (BCC), which they were told would increase in value.
However, the platform's structure raised suspicions. It operated like a Ponzi scheme, using the deposits of new investors to pay the promised returns to earlier ones. This unsustainable model eventually attracted the attention of financial authorities around the world.
The scheme started to unravel when regulatory bodies issued cease and desist orders against Bitconnect, citing the lack of a proper license and the unrealistic promises made to investors.
In January 2018, Bitconnect abruptly shut down its trading and lending platform, causing the value of BCC to plummet and resulting in massive losses for its users, estimated in billions of dollars.
How to Recognize Bitcoin Scammers

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The crypto world's promise of quick wealth can sometimes blind people to potential scams. Recognizing specific red flags can significantly reduce your risk of falling victim to fraudulent schemes. Recognizing these red flags can help you steer clear of scams:
Unrealistic Promises
Be wary of investments promising extraordinary returns with little to no risk—this is often impossible in the volatile crypto market.
Pressure Tactics
Scammers are known for creating a sense of urgency and pushing for quick investments to avoid missing out on "guaranteed" returns. It is advisable to carefully take your time before taking any action or making any decision. This will help you carefully check and recheck to confirm the authenticity of the transaction.
It is important to be aware that cryptocurrency trading offers no guarantee of profit. It is generally considered a volatile investment and investors should approach it carefully.
Opaque Information
Legitimate investments and services are transparent about their operations and the people behind them. Scammers often obscure or fabricate this information. Some might have photos of people on their websites with official designations.
However, these pictures might be stock images planted on their websites to deceive unsuspecting investors. If you want to invest, look for a cryptocurrency project you have researched well enough and have satisfactorily gotten enough information on the internet about everything you need to know.
Personal Information Requests
Be cautious of unsolicited requests for sensitive information, especially your private keys or personal details. These are only private to you and should not be shared with anyone.
Where the cryptocurrency service provider needs more information about you, they will securely ask you and assure you of the safety of your private data. If you can’t get this assurance from them, maybe the service provider is not worth doing business with in the first place.
Suspicious Links and Websites
Double-check URLs for misspellings or odd characters, and ensure sites use secure connections (https). Also, check that the website link is written in full and not as a suffix in the URL.
Unsolicited Offers
Scams often come as unsolicited emails or messages, promising wealth with little to no effort. You can train your email inbox to treat messages like this as spam. Once you see any suspicious message offering you what appears to be too good to be true and is requesting your money or personal information, mark it as spam.
How to Protect Yourself
With all that we have said above on identifying Bitcoin scammers, how can we now protect ourselves from these notorious Bitcoin scammers looming around the internet?
Well, we will say that protecting yourself from Bitcoin scams requires vigilance and proactive measures, and some of these measures are:
- Verify Legitimacy: Before engaging with a platform, do your homework. Check for regulatory licenses, read online reviews, and verify security measures.
- Use Reputable Services: Opt for well-known and reputable wallets and exchanges. The credibility of these services is often backed by user reviews and industry reputation.
- Guard Your Private Keys: Never share your private keys or sensitive data. Secure your digital assets as you would physical wealth.
- Enable 2FA: Two-factor authentication adds additional security to your accounts, making unauthorized access significantly harder.
- Regular Updates: Keep your software and digital wallets updated to protect against new vulnerabilities and threats.
What to Do If You Suspect a Scam
If you find yourself potentially caught in a scam, immediate action can help mitigate the damage:
- Secure Your Accounts: Change passwords and secure your digital wallets immediately.
- Report the Scam: Notify law enforcement, report to cryptocurrency forums, and alert the online platforms where the scam occurred.
- Raise Awareness: Share your experience publicly to help educate and prevent others from falling into similar traps.
Final Thoughts
Navigating Bitcoin and cryptocurrencies can be exciting but also risky. While there's a lot of potential, scams are common. By learning about scammers' tricks, you can stay safe and confident. Stay informed, stay alert, and enjoy a secure and profitable experience.