Top 3 Bitcoin Scams and How to Avoid Them

Virtual currencies such as bitcoin, are intended to serve as a type of money. They may be traded on online exchanges for conventional currencies, including the U.S. dollar, or used to purchase goods and services, usually online.

However, like any other form of currency being traded in a global marketplace, it may entice fraudsters luring potential consumers into Ponzi schemes and other activities in which these currencies are used to facilitate fraudulent, or simply fabricated, investments or transactions. The fraud may also involve an unregistered offering or trading platform. These schemes often promise high returns for getting in on the ground floor of a growing Internet phenomenon.

Many fraudsters are also attracted to using virtual currencies to perpetrate their frauds as transactions in virtual currencies  have greater privacy benefits and less regulatory oversight than transactions in conventional currencies. Any investment in securities in the United states remains subject to the jurisdiction of the SEC regardless of whether the investment is made in U.S. dollars or a virtual currency. In particular, individuals selling investments are typically subject to federal or state licensing requirements.

As with many other currencies and  technology there are a number of fraudulent cases associated with virtual currency that will threaten your investment. To help you transact safer, we’ve put together a list of popular virtual currency scams and best practices for avoiding them.


1. Fake Bitcoin Wallets

Bitcoin wallets are used to store funds and transfer money between other bitcoin wallets. In recent times, mobile bitcoin wallets have become very popular, and scammers see it as an opportunity to defraud users. These fake bitcoin wallets use the names of trusted companies, such as coinbase or Xapo, and go as far as using the same logo. The fake entities trick the users into downloading the mobile wallet, convincing the user that it is a legitimate and trusted wallet. Once the wallet is downloaded, the user is able use it to execute transactions for a while, but once the amount stored in the wallet hits a certain threshold, it is moved out of the user’s wallet and into the scammer’s hand.

How to avoid this

To avoid downloading a fake wallet, go directly to the trusted site, for example or and follow the download wallet link on that site to get the wallet.


2. Bitcoin Investment Schemes (Ponzi schemes)

A ponzi scheme is an fraudulent investing scam that guarantees the investor high returns with little to no risk. The scheme operates on the principle “Rob peter, so you can pay paul.” The people running the ponzi scheme focus on attracting new clients to invest. That new investment is then used to pay original investors their returns. As for bitcoin, these “investments” usually seem very profitable at first since daily payments are being received by users, which makes the users re-invest their “returns” into the same scheme to generate more profit. When the user is ready to withdraw their earnings, that’s where the problem begins and the investment scheme stops paying then the user loses all their invested funds.

How to avoid this

If you want to invest into a digital currency investment service, ensure that the company providing the service is properly incorporated and is run by a reputable industry professional. Be sure to also review the proposed investment strategy outline to ensure it makes sense. Anyone who promises high returns in any investment is usually lying, as there is no certainty in the investment world.


3. Phishing scams

Phishing scams are very common in the online world and have become popular in the Bitcoin community. These scams are whereby scammers send out emails to users saying that they’ve won bitcoin. In the body of the email there will be link taking you to a login page that looks similar to your trusted wallet’s login page. When you input your username and password, the scammers capture that information and take full control of your account.

How to avoid this

Always be vigilant when clicking links in emails that seem inauthentic, especially when checking your emails from your phone. It’s much easier to miss details about the actual sender on a smaller device with condensed information.


So Remember….

  1. Be intuitive: If something sounds too good to be true, then it most likely is. Any investment involves some form of risk, and usually the higher the investment the greater the risk. Any investment scheme that can “promise” you a high return with no risk should be viewed skeptically.
  2. Be thorough: Do the groundwork and background research on any Bitcoin company before doing business with them. Specifically look for transparency in their dealings through publicly available audits.
  3. Be mindful: Online forums such as can provide a balanced perspective on which Bitcoin companies are legitimate and credible. When dealing with crypto-currencies, it is best to tread as carefully as you would when dealing with cash, because just like cash, once you lose it you can never get it back.
  4. Be vigilant: Always be on the lookout for scams. They’re everywhere.