As Bitcoin and other cryptocurrencies have become more popular and gain attention from both the media and consumers, many new investors have emerged seeking to profit off the digital gold rush. As with any new investment there is significant risk to bear, however, in a digital market these risks increase exponentially.
As many remember when email began its journey to become a staple of the modern household, scams like the infamous “Nigerian Prince” began to appear which lost inexperienced users thousands of their hard-earned dollars. These same scams and malicious tactics have reared their ugly head again as cryptocurrencies have become increasing popular and lucrative, and it’s the responsibility of every investor to ensure they are informed to prevent a fraudulent website/person from stealing their money.
While Bitcoin and other cryptocurrencies have been traded for nearly a decade now, it is only recently that a flood of new users have become aware of the incredible amount of returns they can see on their investments. There are many sites that allow one to buy Bitcoin, like Bitcoin of America, but there are also an increasingly rising number of platforms that exist solely to scam customers. We are in the wild west of cryptocurrency as governments and trading agencies scramble to understand the current and future ramifications of this new market.
This article aims to help inform new users of some of the most prominent Bitcoins scams you should be aware of as you invest.
Any person that uses the internet today has inevitably ran into malware scams in some capacity. Whether it is a fraudulent website that installs harmful software on one’s computer as they download something or fraudulent sites that pose as something legitimate up until a user enters their payment information, malware has been a omnipresent scourge of the digital era.
The presence of malware is no different when it comes to buying Bitcoin, it only comes in a different appearance. According to tech support site Bleeping Computer, cryptocurrency malware has begun targeting users seeking to buy Bitcoin or use various Bitcoin Exchanges. Dubbed Cryptocurrency Clipboard Hijackers, these malware scams monitor the Windows clipboard of a user and track when they are close to engaging in a transaction.
As the user attempts to paste the copied link of where they wish to send their funds, this malware replaces the link with an address they control, sending the money into the pockets of the scammers. As it’s difficult to detect if you have a Clipboard Hijacker until the moment of making a transaction, users should always double and triple check that the address they have entered to send their funds to is correct before processing a transaction.
Fake Bitcoin Exchanges
One of the most apparent scams as of late has been fake Bitcoin exchanges, that is sites that pose as legitimate trading platforms but instead steal all of a users’ funds. A prominent example of this was BitKRX, which posed as a Korean Bitcoin Exchange platform. The fraudsters feigned legitimacy by using KRX, the South Korean stock exchange name, as part of their website name in an attempt to lure users into a false sense of security.
Upon trading on this platform, traders never received any of the cryptocurrency they paid for and many ultimately lost all of their investments. To be safe, be sure to do some research before you decide which cryptocurrency site you wish to participate in. Check forums, reviews, and other users experiences with the site to ensure that you do not give your information or money to scammers posing as a legitimate Bitcoin Exchange.
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Man in the Middle Scams
Different from the two aforementioned scams, the Man in the Middle scam can affect parties that are not even seeking to trade Bitcoin. In a Man in the Middle scam, the scammer finds an innocent party who is seeking to buy something online. The scammer offers the middleman a price for their sought after object that is so low that they rush to buy and usually do not take the time to think through their decision clearly.
Step 1: The scammer then finds a third party, someone online who is seeking to sell Bitcoin. The scammer poses as a potential buyer and receives the third parties trading information.
Step 2: The scammer then takes the Bitcoin seller’s information and gives it to the middleman, stating that this is the account he wishes the payment to be deposited in. The middleman then places their money into said account believing that he has paid for the item he sought to buy.
Step 3: The Bitcoin seller confirms to the scammer that he has received the payment and releases the Bitcoin into the scammers account. After this, the scammer disappears and the middleman is left without his money and the goods he expected to purchase.
These types of scams can be extremely hard to prosecute, as many of the scammers use aliases and encrypted connections that prevent them from being tracked down.
The Man in the Middle scam can harm anyone seeking to buy or sell goods on the internet. As such, it’s important to be aware that these fraudsters exist and prey on users in buy/sell websites like Craigslist. Additionally, parties seeking to purchase goods online should always take time to think through the legitimacy of their online purchases prior to entering banking information. If a price seems too ridiculously low to be real, it probably is.
It is our hope that by better understanding the scams and fraudulent practices that exist in the cryptocurrency market today that users can feel more secure about their activity online. While we are in an unprecedented time with new cryptocurrencies and exchanges popping up daily, it can be easy to get overwhelmed with the onslaught of new information.
The team at Bitcoin of America emphasise that we shouldn’t be afraid of trading cryptocurrencies, but we should be aware of the risks and associated scams so we can enjoy our journey as digital investors.