This story is for all bitcoin enthusiasts out there, but it is particularly for new enthusiasts and those still learning the dynamics of the cryptospace. Below I explain some of the most common scams I have run into, how I was scammed myself, and how you can avoid a similar fate.
The Good of Cryptospace
There are many incredible things about the cryptocurrency community. It is filled with creative risk takers who see the amazing potential of blockchain technology to address some of our planet’s biggest challenges. Blockchain technology can eliminate inefficiency, democratize markets, and open up the global economy to billions of people who are currently excluded.
The Bad of Cryptospace
However, there is another side to the cryptospace, a darker side. This is the side of scammers who are trying to trick you into parting with your hard earned crypto. These scammers are everywhere. For example, I often see posts or get messages on Facebook advertising “investment” opportunities like this:
This type of scam is easy to avoid because it is simply too good to be true. If someone were able to turn that kind of profit in a week they wouldn’t need to ask other people to send them bitcoin. They would be making money for themselves.
There are more sophisticated versions of this scam however. Someone recently contacted me and claimed to have admin access to an online gambling website. They wanted me to create an account on the site and deposit bitcoin into it. They claimed they could “make sure” I would win and would do so if I agreed to send half the proceeds back to them. A win, win, right? They sent me a link to the supposed gambling site and let me pick a username from the list of players to show they could control who won.
Sounds great! Except it makes no sense. If this person really could control the outcome of games on a gambling site why would they need other people’s bitcoin? Wouldn’t they just deposit their own and keep all winnings for themselves? When I put this question to the person who contacted me they quickly stopped responding. The gambling website was almost certainly fake (and has since disappeared), mostly likely set up by the scammer themselves to trick people into sending bitcoin. If I had done that I never would have heard from this person again and never seen any winnings.
Bitcoin Investment Team Scams
Another scam I see often on Twitter involve fake investment team offers. A user tweets that they are giving away bitcoin and will choose a winner from among those who follow and retweet their post. Sometimes these are fake giveaways and the user is just looking for followers. In that case, it is annoying but not going to cost you anything. In more sophisticated versions of this scam, those who “enter” the bitcoin giveaway will be contacted and offered the winnings but only after they send the scammer some bitcoin. Here is an example:
I responded by asking for more information about this “investment team” and got this reply:
Here the scammer is promising to send me 1 bitcoin if I join their fake investment team. They asked me to send them 2 ETH as an initial investment after which I would get the 1 BTC. Once again, this is too good to be true. Why would someone with bitcoin to spare not just invest it themselves? Why send it to someone else in exchange for half as much? It simply doesn’t make sense, and this is because it is a scam. The goal is just to get you to send some crypto after which you will never hear from them again.
Another scam to watch out for are websites that offer “High Yield Investment Programs” or HYIPs. These sites offer to day-trade bitcoin that you deposit to the site. The claim they will send the profits to you on a daily or weekly basis. Many sites guarantee high percentage returns (10–12% range) and/or to double your initial investment.
Once again, this is too good to be true. If investment returns are presented as a guarantee, you can be sure you are dealing with a scam. It is impossible to guarantee returns as markets are unpredictable. The typical outcome for someone who is scammed by such a site is to never see any payments at all. If you send your crypto to one of these sites you will likely never receive any payments. Some of the more sophisticated versions of the scam will send out one or two initial payments and then stop. I suspect the reason for this is so that people think the site is legit and refer their friends.
How I was Scammed
So, how did I get scammed? First, it is important to know I was very new to cryptocurrencies and had only been researching for a couple months when I fell victim. This is the most vulnerable time for any cryptocurrency enthusiast. You are learning about crypto and feel like you have a handle on things but there is still so much to learn and you don’t know it yet. Second, it is important to realize that few people ever admit to being scammed. It is embarrassing because we all like to think we are smart and that no one could pull one over on us. Nonetheless, I’m talking about my own experiences so that others can hopefully avoid a similar fate.
Bitcoin HYIP Scam
In my first few months in the cryptospace I started doing surveys in exchange for small amounts of bitcoin. Once I had accumulated .005 BTC this way I came across an HYIP website that offered 10% weekly returns on initial investments. I sent my .005 BTC and received one payment of .0005 BTC and then nothing more. I sent a couple messages to the site’s support line and received no reply. Shortly after, the website came down and no longer exists.
Ethereum Investment Team Scam
You would think being scammed once would have taught me a lesson. Unfortunately, it did not. Shortly after loosing .005 BTC to the HYIP site someone contacted me on Twitter and invited me to join their investment team. I had recently sold some airdrop tokens for 2 ETH so I thought I had nothing to lose. I sent 1 ETH. The person claimed that the transaction never came through, even though I saw on etherscan that it had. I never heard from them again.
My ego was bruised from being scammed twice. I shied away from telling anyone for quite a while. I was lucky in that I never sent any funds that I had used my own money to acquire. Everything I lost was either profit from free airdrops or from completing microtasks online. Since then I have seen similar scams advertised over and over again. I often worry about others who are new to the cryptospace and might lose funds they really need. I now believe that my story about being scammed can help others avoid a similar fate.