Three Common Bitcoin Scams

On July 15, 2020, approximately 130 high-profile Twitter accounts—including Barack Obama's, Joe Biden's, Bill Gates', and Apple Computers'—were compromised and commandeered to promote a Bitcoin scam. The hacked accounts tweeted a message promising a lucrative investment in Bitcoin and a link to invest. While the message did prove to be lucrative, it only benefited the hackers as within minutes of the messages being posted, more than $110,000 USD had been forfeited before they were removed. 




Cybersecurity technology company CrowdStrike co-founder Dmitri Alperovitch declared the attack "the worst hack of a major social media platform yet." While the incident was a high-profile attack which brought a lot of short-term attention to matters of cryptocurrency scams, those of us working in the realms of cryptography and blockchain suddenly had a lot more to think about how to better avoid and prevent scams.  


When Bitcoin and other cryptocurrencies first came into the public eye, they were viewed as a niche investment that the masses simply misunderstood; suffice it to say, few would have predicted the rise of "meme currencies" like Dogecoin back in 2010. With the Bitcoin Boom of 2020 and early 2021, Bitcoin and other cryptos are reaching new heights in terms of value and the number of people investing in them. This growth is great, but it's brought with it the increased likelihood of a scam and the increased likelihood of the scammer's success. 


The challenge with tackling Bitcoin scams is that by nature they are constantly evolving, but they often fall into one of many genres. In the interest of time, we have selected three of the more common types and provided an example of each. 


1. Fake Bitcoin Exchanges 

In 2017, South Korean financial authorities and local Bitcoin investors discovered a fake exchange going by the name BitKRX, which presented itself as South Korea's largest Bitcoin trading platform, when it fact it was just stealing people's money. 


2. Fake Cryptocurrencies 

There are thousands of altcoins—which are cryptocurrencies not called Bitcoin. From Ether, LiteCoin, Ada, and even Dogecoin, there are many perfectly legitimate altcoins. With there being so many though, opportunistic scammers have created fake altcoins to prey on unsuspecting investors. My Big Coin was one such scam, in which fraudsters succeeded in stealing approximately $6 million from customers. 



Pump-and-dump scam

"Pump-and-Dump" Scams artificially inflate the price of a stock (or cryptocurrency), then abandon it to drive the price back down.

3. Pump-and-Dump Scams 

As long as the stock market has been around, so have pump-and-dumps. In this process, a group of scammers will buy up a lot of low-value stock to drive the price up; they then get outsiders to invest in the stock, telling them "this stock is on the way up, so invest in it now and you can make easy money." This would further drive up the stock's price, until the original scammers suddenly sold all of their stock at once—bringing them money and sending the stock's value tumbling at the expense of those they defrauded. Now, many wise investors became wise to this tactic with traditional stocks, but the relatively new tech behind cryptos has reinvigorated the strategy. 


Bitcoin and other cryptos are somewhat volatile investments, so be aware of the various scams that are out there. Remember, if it seems to good to be true, that's because it is. These scams can be lurking anywhere, so always turn to your trusted, verified exchanges and cryptocurrencies. 


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