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Keeping Your Coins Safe

Two cryptocurrency scams are repeatedly seen online; Yet, people continue to lose their coins to these popular scams.

Bitcoin Scam Photo
Fake Bitcoin mining sites and fake faucet wallets are two scams seen repeatedly in the cryptospace

Those who have spent a lot of time in the Bitcoin community are aware of how many different scams are out there and how frequently you run into them. The focus of this dispatch are two types of scams I have seen repeatedly online: fake faucet wallets and fake online mining pools. The goal of this story to describe my own experiences with these types of sites and help others avoid falling victim.

Bitcoin Faucet Wallets

A faucet wallet is a website that appears to a combination of an online crypto wallet and a faucet. As a wallet, it will offer the opportunity to register and receive addresses for bitcoin and altcoins conveniently on one site. As a faucet, it will offer free daily deposits of small amounts of Bitcoin and other cryptocurrencies. However, unlike a conventional faucet, which actually pays out even if the amounts are tiny, faucet wallets are pure scams. The point is to lure you into depositing your own coins into the site. Here is a screenshot from a fake faucet wallet that was still live at the time writing:

Faucet Wallet Example
The balances are supposedly from free daily deposits of Bitcoin and other into my account. In reality, there is nothing in the wallets.

It seems to be a one-stop-shop for Bitcoin and altcoin addresses. Notice it offers a “100% first deposit bonus.” This is typical of faucet wallet scams. They offer to pay a bonus on deposits to get you to deposit your coins. If you do, all will seem well until you request a withdrawal and nothing happens, or the site simply disappears. With the site pictured above, I requested a withdrawal of the Bitcoin balance once it crossed the minimum withdrawal limit. I clicked “withdraw” and a message appeared saying it was a “success.” I was unimpressed because I had never inputted my BTC address. The site had no place to withdraw the Bitcoin to. Needless to say, I never received the withdrawal.

Fake faucet wallets also typically have a referral structure that offers additional bonuses for signing users up via a personal referral link. Those who post their link to social media for others to use unwittingly become accomplices in the scam.

The QoinPro Saga

Over the last few years, I have seen multiple faucet wallet websites come and go. However, one has proven particularly tenacious, existing for several years and scamming people the whole time. QoinPro claims to be an online wallet that deposits Bitcoin and various altcoins into users’ wallets daily. I am familiar with QoinPro as I encountered it early in my time in the cryptospace. Back then I was naive about the scams out there and registered for an account. I believed I was really getting daily deposits and even shared the site on social media. Fortunately, I had almost no followers and the only people who signed up were family members, none of whom deposited their own coins. Thankfully, I also never deposited my own coins.

I had completely forgotten about QoinPro until recently when I saw some social media activity from people claiming they never received withdrawals they requested through the site. On QoinPro’s Twitter was a post announcing the site was down for an upgrade and would be back on May 25, 2018. The day came and went and tweets from angry users followed. QoinPro then tweeted the re-launch had been pushed back to July 23, which also came and went with no new site appearing. The posts from angry users continued.

QoinPro’s Tactics

I dug deeper and discovered QoinPro had gone live on February 6, 2014. A user posted on Bitcointalk announcing the launch of a “multi-currency crypto wallet” with free coins deposited daily. For a few weeks there were posts from other uses who were trying to profit from the referral bonus. They were offering to send users small amounts of altcoins in exchange for signing up to QoinPro via their personal link. Some posters organized promotions where those who signed up via their referral link were entered into a draw for some BTC. While there is little evidence many people responded to such outreach (i.e. almost no replies to these posts), it is clear that people were pushing their referral links quite aggressively.

My research further revealed a new tactic from QoinPro beginning in 2017 as the Bitcoin Cash hard fork approached. Account holders began receiving emails stating they could claim BCH through the site if they deposited Bitcoin before the fork. One user mentioned having deposited 0.7 BTC into QoinPro in response to the email. He requested a withdrawal after the fork and it never came. After sending “thousands” of emails to QoinPro he had yet to receive a reply.

With all the evidence online of users not getting withdrawals you would think it would be impossible for QoinPro to stay online, however, I recently discovered that the site has indeed returned at a different URL.

Fake Mining Pools

Fake mining pools are websites that offer to sell different amounts of hash power. Hashing power is the power a computer uses to run and solve hashing algorithms. These algorithms are used for generating new cryptocurrencies and allowing transactions between them. This process is also called mining. A fake mining pool site will let you sign up for free, promising you can mine small amounts of crypto without having to pay anything (tip: a promise of something for nothing is always a red flag). Once you register, you discover the amount of free coin is very low but can be increased with the purchase of more hash power. Here is a typical example:

Litecoin Mining Pool Scam
This image is from a fake Litecoin mining pool website offering to sell hash power

I joined one of these sites when I was new to the cryptospace. Fortunately, I did not purchase any of the hash power packages offered for sale. Instead, I waited to see if it really was possible to mine Litecoin for free. The minimum withdrawal on the site was 0.2 LTC. I kept the tab open on my computer for five days until it showed an account balance of 0.2 LTC. I initiated a withdrawal. It never came. I sent a couple emails to the support channel but never got a reply. A bit of research online revealed stories from people who had purchased hash power packages complaining about not receiving payouts.

Spotting Scam Wallets

The best way to determine if a faucet wallet is a scam is to look at whether it is offering free coins in exchange for a deposit. This is a huge red flag. Genuine crypto wallets do not give out free coins. They try to design the best possible product so users want to use it. If in doubt, try searching the name of the website with the word “scam”. If the site has been around for a bit you will likely see hits about it ripping people off. A related option is to consult social media. Check for mentions of the site on Twitter, Reddit, and Bitcointalk. Often people who have been burned by scam sites will post their stories to warn others

Spotting Fake Mining Pools

Unlike fake faucet wallets, fake mining pools are trickier to spot for those new to the cryptospace. This is because there are legitimate mining pools where people combine resources to benefit from communal hash power. Mining in pools began when the difficulty of Bitcoin mining increased to the point where it could take centuries for slower miners to generate a block. For these miners, the solution was to pool their resources so they could generate blocks more quickly and receive a portion of the reward on a consistent basis, rather than randomly once every few years.

A fake mining site will purposely try to confuse you by describing itself as a mining pool. For example, the scam Litecoin mining site pictured above calls itself an “LTC mining pool,” though it is anything but. The key difference between a scam mining site and a legitimate mining pool is the latter is a group of miners who agree to share block rewards (mined coins) in proportion to their contributed hash power. In other words, they are selling hash power to the pool. They are not buying hash power from the pool.

If a website is offering to sell you hash power it is a scam. Think about it this way: why would anyone sell you hash power and give you some of the reward for mining when they could use the hash power themselves and keep all the reward? For tit to be rational from a business perspective, the value of what you get would have to be less than what you are paying.

Conclusion

Fake mining sites and fake faucet wallets are two common scams in the cryptospace and newcomers are most at risk of falling victim. Some good rules of thumb are that faucet wallets are always scams, so steer clear of them. The telltale sign of a scam mining site is it offers to sell or rent hash power. You will not make money from such an arrangement so steer clear as well. Finally, when dealing with any website that offers to sell you something in exchange for crypto always do research online. If you see reports of people losing funds, stay away.


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