BitCoin Scam Defintions

Discussion in 'Virtual Money Scams' started by arrana, Dec 16, 2013.

  1. arrana

    arrana Samurai

    Any fraud using the crypto currency BitCoin (BTC) is considered a BitCoin scam. There are two categories of BTC scams:

    1) Any scam or financial crime that uses BitCoin as a payment method

    For example:

    -Phishing
    -Sale of illegal goods
    -Ransom ware payment
    -Non delivery scams
    -ETC

    2) Scams that involve the protocol used in BitCoins and the BitCoin Peer to Peer Network of users (P2P)

    Examples:

    -Stealing BitCoins from owner’s wallets by hacking
    -Fraudulent investment schemes such as “Pump and Dump†and Ponzi/Pyramid schemes
    -Moneylaundering
    -BitCoin Mining scams
    -Installing unwanted malware on user’s devices to “mine†the formation of BitCoins
    - ETC

    The majority of BTC scams being detected on the Internet right now are the “Pump and Dump†and Ponzi/Pyramid.
    There are at least sixty types of crypto currencies (and more each day) that are derived from the BTC protocol. Some of them are LiteCoin, NameCoin, and PeerCoin. The majority of scams now involve BitCoin because its value has risen sharply over the last few months.

    BitCoin “Pump and Dumpâ€

    A “Pump and Dump†(P&D) fraud occurs when an item or stock is managed such that the value is artificially inflated. It is thenâ€dumped†–the fraudsters making money and investors losing their money.

    A BitCoin P&D can occur when a group of scammers buy up a massive amount of low rate BitCoins at one time, suddenly pushing up the price/value of each BitCoin to an artificially high value. The BitCoins are now valued at a higher value than what the scammer group bought them. Then the scammers sell off all the BTCs at once to investors, pocketing the profit. The value of each BitCoin now plummets for those holding those coins.
    Another variation of a BTC P&D involves the use of BitCoin wallets. A “wallet†is a section on a digital device where a BTC user stores his/her private keys which regulate the BitCoin transactions. There are software wallets, which allow the user to store BTCs on their computer, USB drive, or any other mobile device and web sites which allow the user to store their BTCs online to be accessed from anywhere.

    In this other BTC P&D scammers run “exchanges†where BitCoin investors/users help “mine†create) BitCoins. To create BTCs, individuals must use computers to solve algorithms. Those working to help create a BTC get a percentage of that BTC, based on the “work†they have contributed. As more individuals are added to create BTCs, it takes longer and more power. The scam exchange now charges more (in the created BTCs) to each individual worker for server rental and for storing their BTCs. The scam exchange is ripping off those who are actually creating the BTCs.
    Very often these scam exchanges will offer individuals free increments ( Partials) of a BTC as an incentive to begin participating in creating BTCs.

    BTC Ponzi/Pyramid Schemes

    In Pyramid frauds the scammers present themselves as a legitimate company. A scam BTC investment scheme will promise a high rate of return in BTCs to investors. A new investor will pay his “investment†and a small amount of that money will be paid to the earlier investors while the rest is pocketed by the scammers. In many of these Pyramid frauds the scammers simply fold the website and walk away with the BTCs, leaving investors with nothing.
    Another fraud, some scammers will represent themselves as a company who provides a “wallet serviceâ€- somewhere online so a BTC user can store their coins for easy access. When those scammers get a BTC from a user, they will sell them at a higher price on a currency exchange (or even eBay), then buy another BTC at a lower rate, keep the profit and replace the BTC in the user’s wallet before the user knows it was used.

    Warning Signs

    To protect yourself and your BTCs, make sure that you research the company/organization that you will be dealing with. Google the company and find out if anyone else has been scammed. Tell tale signs of a scam are a company who only has an email for contact and no physical location. Also avoid companies that are anonymous- no names are affiliated with the company, and those that have websites that have been newly registered.

    Remember- If it sounds too good to be true...then it probably is!
     
  2. arrana

    arrana Samurai

    New BitCoin Scam

    Possible new version of a BitCoin scam being reported.

    The mass emails are sent loaded into the Blind Copy ( Bcc ) of the email header. The scammer hopes the email receiver believes that he received the email by mistake, is greedy enough to want to “steal “ the BitCoins, and will click on the link to open the zipfile. The downloaded malware may result in stealing BitCoins from the user’s digital wallet.

    File name walletBTC_4Lpphu.zip . See https://www.virustotal.com/en/file/...2572009d3c186e030c472039/analysis/1387522317/


    The email:

    Note: There are variations that use different names and that use blockchain.info or wallet.dat instead of bitcoinqt

    The sent from email address may be [jonathan.phillips2015@gmail.com]
     
  3. arrana

    arrana Samurai

    Crypto Currency Resources # 1

    Here is a basic starter list of informational websites on the different crypto currencies. Please post your suggestions for resources to the list but make sure the website is safe.

    Coin Desk http://www.coindesk.com/
    Keep up with what is going on.

    BitCoin Magazine http://bitcoinmagazine.com/

    Reddit http://www.reddit.com
    Information on all things - use SEARCH for specific topics.

    BitCoin Wiki https://en.bitcoin.it/wiki/Main_Page

    YouTube http://www.youtube.com/
    Use SEARCH for specific currency videos.

    Cryptsy https://www.cryptsy.com/
    Cryptsy lists the market value of 121 crypto currencies.

    Coin Market Capitalizations http://coinmarketcap.com/
    Coin Market lists the major crypto currencies and graphs the changes in valuation over thirty days. Click on a currency and you can get information on what it is and list of resources dedicated to that particular currency.

    Mt.Gox Exchange https://www.mtgox.com/
    Mt. Gox has a money services business (MSB) license from FinCEN, the U.S. federal money transmission regulator. At the top of the Mt. Gox webpage there is a BitCoin/currency converter.

    BitCoin Charts http://bitcoincharts.com/
    This website allows you to see the prices of BitCoins on different exchanges around the world (click on VIEW ALL MARKETS under the exchange insert ) plus it has a BitCoin/fiat currency converter
     
  4. arrana

    arrana Samurai

    Bitcoin High Yield Investment Program Scams



    High Yield Investment Programs (HYIPs) are based on pyramid/Ponzi schemes- those investment proposals which promise unsustainably high return on investment by paying early investors with the money invested by new investors.

    All Bitcoin HYIPs are considered scams. Payment to each investors is dependent on 1) continued rising value of the bitcoin currency and 2) steady flow of future investors. The Bitcoin HYIP may promise a high return such as 130% in twenty-four hours on investment.

    Some investors gamble by attempting to make money by investing in a HYIP early and selling out early, leaving later investors without any return.

    Potential investors are advised to do a browser search of the intended HYIP to find any scam complaints. They should also do domain search for creation date and determine how many times the website has been visited. The longer the website has been in operation and the more traffic means the more likely the new investor will be scammed. Websites monitoring HYIPs list individual Bitcoin HYIPs, the timing of payments, and whether that particular HYIP has had any trouble meeting investor payments or stopped operating.
     
  5. arrana

    arrana Samurai

    More on High Yield Investment Programs which operate as Ponzi/Pyramid schemes. Types: Traditional, Bridge, and Bitcoin:

    The main difference between “Bridge” HYIP Scams and Bitcoin based HYIP Scams is that “Bridge” scams rely on different types of payment for investment by victims and not just crypto currencies. Some of the payment systems include wire transfers such as Western Union, credit cards, PayPal, Perfect Money, etc. Traditional HYIP Scams use traditional payment systems.

    Bridge HYIPs tend to last longer than Bitcoin HYIPs because more money is invested earlier in the scam as there is a wide variety of payment options available for investors. This input of money allows the scammers to continue to pay off their victims longer before folding and disappearing. The longer period of operation creates a false sense of solvency for future investment, which draws even more investors.

    Tracking Bridge HYIP scams is easier since the different payment options means that somewhere on the scam website there is a permanent incoming payment address of some sort.
     
  6. arrana

    arrana Samurai

    Double-Dip Bitcoin Scams

    Double-Dip Scams occur when scammers try to scam their victims a second time either by same type of scam or by a fake compensation promise by a law enforcement organization.

    The same scam can occur in cryptocurrencies. In fact, Bitcoin may be ideal for Double-Dip Scams. For example, a scammer defrauds a victim out of Bitcoin in a HYIP scam (High Yield Investment Programs are almost always pyramid schemes). After the victim learns that the investment program is a scam, the scammer then emails the victim posing as a representative of a law enforcement organization. It states in the email that the victim is in line for compensation....as long as the victim can supply personal information to prove that they have been scammed and/or pay a restitution fee to the fake law enforcement representative. The personal information can include the password of their Bitcoin wallet.

    The personal information can be used to further scam the victim and the password can be used to hack the victim's digital wallet.
     

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