Keep your eyes open and beware of these five Bitcoin scams

Summary : As consumers continue to increase their holdings of Bitcoin and many brokers begin to accept virtual currencies for deposits, Bitcoin fraud is gradually increasing, and FOREXPRESS has to sound the alarm for all investors. Bitcoin transactions are irreversible and are not regulated by central agencies or banks, so Bitcoin can easily become a tool for fraud or theft.

As consumers continue to increase their holdings of Bitcoin and many brokers begin to accept virtual currencies for deposits, Bitcoin fraud has gradually increased, and FOREXPRESS has to sound the alarm for all investors. Bitcoin transactions are irreversible and are not regulated by central institutions or banks, so Bitcoin can easily become a tool for fraud or theft.

Recently, the "MMM" mutual aid community, which has been developing rapidly and is very popular in China, is a financial Ponzi scheme created by Russian financial fraudster Sergey Mavrodi using the virtual currency Bitcoin. Although the People's Bank of China, the China Banking Regulatory Commission and others have issued investment warnings for such "mutual aid communities", thousands of Chinese investors are still pouring into this financial mutual aid community.

It is reported that "MMM" requires new members to buy Bitcoin before joining, and as a form of "mutual assistance", Bitcoin will be distributed to other network members. "MMM" promises to give members a 30% return on monthly profits, and a 10% bonus for recruiting new members. Members' acceptance speeches uploaded to video websites and other media make all this look real and credible.

Bitcoin scams are usually launched in online forums or chat rooms. The initiators usually fake a sophisticated portal and try to make investors think they are legitimate. Here are the five most common Bitcoin scams:

1. Bitcoin Ponzi Schemes and High Yield Investment Projects

This type of scam usually attracts investors by offering high interest rates on deposits. Like other Ponzi schemes, the interest rates paid to early investors are actually from the funds of later investors. If no new investors join, there is no way to pay the fees to early investors, and the scam cannot continue. This type of scam usually only lasts for a few months, but the organizers of the scam will restart and repeat the process.

The SEC alleged on December 2 that two bitcoin "minting" companies named GAW Miners and ZenMiner and their founders used virtual currency as bait to defraud investors of their money and set up a $ 20 million Ponzi scheme. In July 2013, the SEC sued a 30-year-old man for operating a bitcoin Ponzi scheme that defrauded more than $4.5 million.

2. Bitcoin Mining Investment Scam

Bitcoin mining involves transaction verification and blockchain security. This process requires very powerful and expensive computer equipment. Mining investors are often asked to pay a deposit when ordering equipment, but they never get the equipment.

3. Bitcoin Wallet Scams

A Bitcoin wallet is a software program used to store Bitcoin. Wallet scams usually attract customers with anonymous transactions. Once the customer's deposit reaches a certain level, the scammers directly transfer the customer's Bitcoin to their own wallet.

4. Bitcoin exchange scams

Bitcoin exchanges often claim to offer better credit card rates than their competitors. Illegal Bitcoin exchanges no longer return Bitcoin or cash after receiving customer deposits.

5. Bitcoin Phishing

Phishing scams involve sending emails to customers, informing them that they will receive Bitcoins, but they need to log in to their Bitcoin accounts through a link in the email to receive the Bitcoins. This allows the phishing scammers to gain control of the customer's account.

Avoid Bitcoin Scams

Before considering a deal with a Bitcoin-related company, investors should do a thorough background check on the company and understand how transparent its dealings are. Public audits can provide some assurance that a company is doing what it claims to be. Reserve crypto audits allow companies to disclose their Bitcoin holdings. Reputable forums can also provide an objective assessment of a company's legitimacy.

Conclusion

China is very weak in virtual currency regulation. In December 2013 and March 2014, the central bank and other institutions issued the "Notice on Preventing Bitcoin Risks" and the "Notice on Further Strengthening Bitcoin Risk Prevention Work" respectively, requiring financial institutions to cut off their ties with Bitcoin.

Fu Weigang, a researcher at the Shanghai Institute of Finance and Law, said that China currently has no relevant laws and regulations on virtual currency Ponzi schemes, and related cases are collectively referred to as illegal fund-raising.

Xiao Sa, a partner at Beijing Dacheng Law Firm, said that in China, Ponzi schemes will first be identified as illegal financial business activities by the "Measures for the Prohibition of Illegal Financial Institutions and Illegal Financial Business Activities". If virtual currency is involved, the law does not have clear provisions. However, she analyzed that under the premise of complying with Article 176 of the Chinese Criminal Law, if the corresponding virtual currency can be exchanged for RMB , it can also constitute the crime of illegally absorbing public deposits, and therefore can also be handled under this crime.

In the real world, if something looks too good to be true, it is probably a scam. The same is true for Bitcoin transactions. It is best to treat it with the same caution as the cash we use every day. Once you lose it, there is a high probability that you will never get it back.