How to Avoid Cryptocurrency Scams
Cryptocurrencies continue to gain popularity in 2018. And as more and more people come flocking into Bitcoin and cryptocurrencies, so are scammers waiting to prey on unsuspecting victims. In the Philippines, the latest of these scams involve Arnel Ordonio and his wife Leonady, who amassed nearly P1 billion by luring victims to “invest in their online business, promising a 30% return on investment with payouts every 15 days.”
In this article, we’ll provide you with the most common cryptocurrency scams to help you create informed decisions. Let’s begin.
How to Avoid Cryptocurrency Scams
Cryptocurrency scams generally fall into two categories: phishing scams that steal your information and fraudulent investment schemes that “guarantee large returns”. Like any other investment activities, Bitcoin doesn’t guarantee any return of money. If something is too good to be true, it definitely is.
Here are the common cryptocurrency scams that you may encounter:
Fake Cryptocurrency Exchanges
Cryptocurrency exchanges are platforms where anyone can buy cryptocurrency that they can store on their wallets (more on this later). Fake crypto exchanges lure victims by offering absurdly low discounts.
What happens when you sign up on fake cryptocurrency exchange? One is that hackers can inject malware into your account, stealing your coins. A fake crytocurrency exchange can also invite you to send money, then the site “mysteriously” shuts down and your coins never arrive.
You can begin inspecting a fake cryptocurrency exchange by looking at its URL. Legitimate cryptocurrency exchanges always start with https (there should be a green lock in your address bar).
Another way to detect fake cryptocurrency exchanges is by looking at the URL. Using the same example above, notice that the URL in the ad is blokchian.info instead of blockchain.info. These small iterations may seem obvious but anyone can fall into the trap if they’re not careful. Platforms like Facebook, Google, and Twitter have taken massive steps to prevent fraudulent bitcoin schemes however, which includes bans on cryptocurrency-related ads.
Fake Bitcoin Wallets
If exchanges are for buying and selling bitcoin, wallets are primarily for storing them. This is important to remember because downloading and installing a fake bitcoin wallet allows hackers to steal your passwords and private keys.
Spotting a fake bitcoin wallet is the same with exchanges but it can be trickier. A fake wallet can be replicating a reputable site almost perfectly, with only a slight change in URL name. What you can do are the following:
- Ask for opinion in forums or Reddit. In the Philippines, Bitpinas is a good resource on trustworthy local bitcoin wallets.
- If you’re downloading an app, check its reviews and download numbers. The more downloads and rating an app has, the more reliable it is. As a rule of thumb, only consider apps that have more than 1,000 downloads (with an average of 4.5 stars).
- In the Philippines, there are currently 2 digital currency wallets licensed by the BSP. One of them is Bitbit.cash.
Bitcoin Ponzi Schemes
Bitcoin Ponzi schemes are probably the hardest one to avoid, especially when you’re just starting to invest in cryptocurrency. The Ordonio scam is a prime example of a Bitcoin Ponzi scheme.
To spot a possible Ponzi scheme, you should take a look at the offer. If we look at the Ordonio scam, they attract victims by promising “a 30% return on investment with payouts every 15 days by investing in their online business”. In this statement alone, you’ll find two suspicious things:
- A 30% return on investment in such a short time is unreal; and
- Anyone can buy and sell Bitcoin and cryptocurrency. You don’t need to “invest” in another entity to get started.
But despite these, Ordonio and his wife still almost got away with P900 million from 50 people.
To avoid Bitcoin investment scams like these (and other scams), you should watch out for the words that they’re using. Anyone who says “easy”, “guaranteed”, or “no need to do anything” is most likely a scammer and you should stay away.
Bitcoin and Cryptocurrency is Here to Stay
That said, investing in Bitcoin carries a significant amount of risk and scammers are always waiting for unwilling victims to come their way.
We strongly believe that Bitcoin & Blockchain is a robust technology that could be superior to fiat money thanks to it being a valid store of value like gold, a robust tool for governments reduce hyperinflation & currency devaluation risks, and a tool for reducing money transfer costs.
While we think that Bitcoin is here to stay, know that all forms of speculation (stock trading and forex trading for example), carry a lot of risks. Only invest in what you can afford to lose and never go all in on Bitcoin.
And finally, remain vigilant by following our tips!
