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A Guide On Avoiding Fraud In Cryptocurrency

By William Gaithersworth on The Capital

William Gaithersworth
Feb 15 · Unlisted

Due to the fact that the cryptocurrency market is extremely unregulated, and the amount of money floating around in it currently, scammers are trying every conceivable method possible to make money off of those who are ignorant to the risks they face.

This article outlines a wide variety of ways that scammers are trying to take advantage of the cryptocurrency market today, but it is important to keep in mind that they are always looking for new ways to get one over on you which means it is important that you never do business with any company that isn’t reputable in order to ensure that your money stays safely where it belongs.

While some cryptocurrency exchanges are less reputable than others, most at least try to provide a legitimate service to consumers. This is not the case with exchanges at the bottom of the barrel, however, as they are typically fake from the start and are simply looking to take money from the uninformed and vanish into the ether with it. The easiest way to determine if an exchange is a scam or not is based on its advertisements.

If the exchange is offering to sell you a cryptocurrency at a flat rate that is below its current market value then there is a ninety- five percent chance that they are only looking to take your money.

Cryptocurrency exchanges work in the same way that any other exchange does which is to say that users buy and sell currency to one another.
As no user is going to expect less than market value for their cryptocurrency, this is a red flag that something fishy is going on. The other red flag you should be aware of is if you come across an exchange that is offering to buy your cryptocurrency directly through PayPal.

This is also not how exchanges work. If you buy into a particular exchange using your cryptocurrency then that cryptocurrency doesn’t leave your possession until someone else has paid for it through legitimate channels.
These types of scams have you enter your PayPal details and then tell you to send your cryptocurrency to another address, typically found on a QR code so it is especially easy for them to change it when the jig is up. Of course, once you send off your Bitcoins the promised payment will never materialize and you will not be able to get in contact with the exchange directly. In general, it is never a good idea to sell your cryptocurrency outside the boundaries of a reputable exchange.

Spotting a fake cryptocurrency wallet can be more difficult than spotting a fake exchange simply due to the fact that they store your cryptocurrency as opposed to buying and selling it which means the fraudulent part is generally going to come in the form of malicious software that will attack your phone or computer in an effort to steal your personal data.

Officially sanctioned wallets can typically be found on the primary website for the cryptocurrency in question. The easiest way to determine if a given wallet is fake or not is to listen to your instincts and consider if anything about the website seems off.

Additionally, you are going to want to avoid websites whose URL does not include HTTPS at the start as this means it is not secured which means you wouldn’t want to enter your personal detail anyway. Before downloading the wallet of your choice, you are going to want to ensure that you entered the URL correctly as similar, but misspelled URLs often lead to fraudulent sites.

Furthermore, if the wallet you are planning on using isn’t online and is instead a file that you download you are going to want to ensure that you scan it for known malware before you install it to your hard drive. If you don’t have virus software on your computer, you can use the site to check it for you.

Finally, it is always recommended that you choose a wallet that the cryptocurrency community that you now belong to approves of to see if other people have had success when using the wallet you are thinking about storing your hard-earned cryptocurrency in.

Another scam that you are likely to see a lot of is the cryptocurrency phishing scam. This scam involves the scammer trying to trick you into thinking they are an authority from either the website for the cryptocurrency you are using or from the exchange you are a part of.

They will generally tend to recommend that you visit some website which will then proceed to ruin your day. The most common version of this scam involves sending you an email requesting your presence, though popup advertisements may work the same way.

Either way, the end result is either going to infect your computer with malware or end with the scammer trying to steal your cryptocurrency directly. If you receive an email that doesn’t seem entirely on the level, the first thing you are going to want to do is to never take the bait.

This can be easier said than done, however, as the email may very well appear legitimate either because the exchange you use has had their database hacked or because the scammer has gotten a hold of your email address via other nefarious means.

Regardless, the best practice is going to involve never opening any proffered attachments or clicking on hyperlinks in emails whose sender you cannot verify. If you have legitimate business with the website in question, instead of responding to that email, visit the site directly and look for contact details before asking a real person about it.

Another common tactic that scammers use is to create an official looking hyperlink but this can be countered by looking at the URL it is sending you to by simply holding your cursor over it and looking at the web address that pops up. Finally, you will always want to verify the address of the person who sent the email.

While it is possible that the address is fake or was spoofed, this will often give you an idea of whether or not it is on the level. More than anything else, knowing that these scams are out there should make it much easier to avoid them. When it comes to dealing with fake online advertisements, it is important that you are careful about the sites you go to online.

The most common way that unsuspecting users get pulled into these types of phishing scams is by doing an online search for something related to cryptocurrency and then clicking on the first link that comes up without even really looking at it. This is a poor choice, however, as this first link is almost always going to be sponsored content and just as frequently lead to a scam of one type or another. You can avoid this risk completely by simply knowing where you are going online and entering the URL in question directly.

The exact specifics of a cryptocurrency Ponzi scam might vary, but they all have one thing in common, they require that you send in your cryptocurrency in exchange for a better than average return on your investment.

The most common version of this type of scam claims that it can double the amount of cryptocurrency that you provide them within a short amount of time. They are also easy to spot due to the fact that they typically work on a referral system that encourages those who are already part of the program to get those whom they know to sign up as well.

If you come across a site that is offering you a commission to get other users to take part in the program, or if you came across the recommendation in an online forum then there is a good chance the program is part of a Ponzi scam. If you are unsure of the validity of a given program, the best place to stay up to date on what is legitimate and what is not is the Reddit page for the cryptocurrency in question.

This is one of the more difficult types of scams to suss out, simply because it will likely appear on the level, at least at first. Odds are, when you first sign up with the fake mining pool, you will receive payments as if you were actually validating blocks, though you will likely be asked to pay a fee to become a part of the pool.

The money you make from the pool is actually going to be a portion of the fees that have been collected by other miners which means it is likely to decrease over time as word about what the mining pool really is leaked out to the community. As always, you are going to want to start by trusting your instincts and checking out the relevant forums in order to determine if anyone else has previously had trouble with the mining pool.

If the pool is new then it might not have much of a presence on these sites, but it will be a good way to weed out those that have already been identified as scams. Additionally, when it comes to signing up for a mining pool it is always important to track down the one you are going to use yourself and to never follow any referral links as these will rarely lead to reputable options.
When looking into these services, you will need to keep an eye out for a handful of different details that legitimate pools will provide. This includes things like the pool that they mine from and the ability to choose the pool you wish to contribute your hash rate too.

You will also want to be aware of the limits that are expressed in terms of the maximum hashrate that the mining pool can handle, as very few legitimate pools have access to anything close to an unlimited amount due to the fact that hardware of this type is expensive and it takes time to both deploy and acquire.

Fake services will not have any limitations in this area, often because they are doing any actual mining in the first place. While this type of scam might seem relatively benign if you are still making a profit, it is important to keep in mind that unlike with a legitimate service, these payments are going to decrease over time, if they come in at all.

Along these lines, it is also easy to determine if a mining pool is a scam if their site starts to cut the rates required to buy into the program. Scammers will typically continue cutting the required rates as low as they need to in order to keep attracting new marks.

This process will continue until no one is left who will bite at which point they will take the money they made and the mining operation will fold. Due to the fact that once you buy in they have your money, these types of scams can often go on for months, if not years, as long as the mining pool keeps attracting interest.

You will also want to keep an eye out for mining pools that have an endorsement from a registered ASIC vendor. These vendors provide a large majority of all of the mining machines used by mining pools and, nine out of ten, will provide the pools whose machines they have provided with a certification logo or a post lending credence to the operation.

There is no downside for them when it comes to this type of thing as it is a free advertisement while also improving consumer confidence in their brand. If you are thinking about a mining pool that can’t provide this information, think twice.

Along similar lines, the mining pool should be able to readily provide pictures of their hardware and data center, and if this information isn’t on their website directly then they should be able to provide it to you by request.

Regardless of what they say in response, this is a request that only shows you are being careful with your money. If you receive anything but the requested pictures then you will know the operation is a scam.

The Capital

The Capital (former Altcoin Magazine) is a social financial…


William Gaithersworth

Written by

Content Specialist in Cryptocurrencies | Blockchain | Financial Markets | Technology | Future | Science | Space Visit us at

The Capital

The Capital (former Altcoin Magazine) is a social financial news aggregator powered by Bitcoin

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