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How can I detect a Bitcoin scam?

Crooks flock to lucrative markets. This is as certain as the sun rising in the east. Thieves will attempt to rob people of their earnings, and surging financial markets provide fertile ground for this nefarious activity. The Bitcoin market exemplifies this phenomenon. Since Bitcoin is an extremely valuable, high-liquidity, bearer-asset, that can be sent across borders almost instantly, without any oversight, it is a top-priority target for scammers. Unfortunately, people fall victims to scams even though they know they exist.

So, how can you detect and avoid a scam? We offered some tips and tactics to recognize scams in general and to protect yourself. Today, we will focus on Ponzi schemes.

Ponzi Schemes are fraudulent investments that pay early participants with the funds invested by later participants.


A Ponzi scheme is an “investment” — really, an illegal operation — which relies on funds from new investors to pay returns to old investors. Instead of using savvy financial management to grow wealth, the crooks who run these schemes move funds behind closed doors and pocket significant amounts for themselves. These schemes survive as long as crooks attract enough new investors to pay old ones. However, they always run out of a new investors at some point, and everything collapses. Unfortunately, the victims of these “investments” will often never recover their funds.

Many crooks operate cryptocurrency Ponzi schemes. If anybody guarantees that you will become rich by investing in Bitcoin, beware! They may very well be running a Ponzi scheme.


Motley Fool, a leading investment advice company in the United States, offers six warning signs to detect a Ponzi scheme.

1. Low risk, high returns. Financial markets do not work this way. Either you take a low risk and receive a low return, or you take a high risk and receive a high return. Bitcoin carries high risk because it is a volatile cryptocurrency. For example, it lost 36% of its value from June 11 to July 16. Anybody who says that it carries low risk is either crazy or untrustworthy.

High rewards with no mention of risk? Sounds like a Ponzi scheme.

2. Very consistent returns. Very few investments — if any — bring consistent returns. Annual returns for Google, varied from -56% to 102% over the past ten years. And Google is a much more stable investment than Bitcoin.

WeiFastPay. Guarantee of daily profit? Sounds like a Ponzi scheme.

3. Unregistered investments and unlicensed sellers. Bitcoin is often unregulated, so it may be hard to find registration documents for Bitcoin businesses. However, legitimate businesses are searchable online nowadays. For example, Bitrefill has a page in Crunchbase, a trusted database of startups, with Twitter comments left by users. Use other sites to collect proof that a Bitcoin investment company is real.

No registration and licensing information readily available. Sounds like a Ponzi scheme.

4. Complex and secret strategies. At a net worth of $73 billion, Warren Buffett is the fourth wealthiest person and arguably the most successful investor in the world. His advice? “Never invest in a business you cannot understand.” If you do not understand or do not feel comfortable with an investment in Bitcoin, stay away and be safe.

Ponzi Schemes prey on greed, they entice with the promise of easy money. Passive investment income? Sounds like a Ponzi scheme.

5. Paperwork problems. Legitimate businesses should operate smoothly. If an investment company cannot process their paperwork well, how can you trust that they would handle your Bitcoin well? Most likely, they are doing neither.

If it sounds too good to be true, it sounds like a Ponzi Scheme.

6. Difficulty receiving payments. This may mean that a crook has not collected enough funds from new investors to pay old ones. You are most likely involved in a Ponzi scheme and will never recover your Bitcoin again.

In summary, if an investment sounds too good to be true, it is. Stay away! It is better to hold on to your Bitcoin and to protect its value than to believe in a get-rich-quick strategy and to lose everything. The Bitcoin market is filled with Ponzi schemes. Please, use our advice and be careful.

So, what should you do with your Bitcoin? Well, you could purchase a good or service. For example, we at Bitrefill enable people to top up prepaid mobile phones with Bitcoin. It is convenient: top up your mobile phone from any place at any time. Or you could purchase a good or service from another company that accepts Bitcoin near you. These ideas may not sound as sexy as the promise of becoming rich through an investment, but at least you can ensure that you will receive value from your Bitcoin.



Recharge prepaid phones with Bitcoin

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