An investor’s guide to Bitcoin scams

While there are many legitimate cryptocurrency platforms to invest through, this largely unregulated space is still rife with cybercrime. For instance, Bitcoin scams are an all-too-common crime – despite it being a relatively established cryptocurrency.

Scammers take advantage of cryptocurrencies like Bitcoin because they are particularly challenging to trace. This coin leverages blockchain technology for verification and has no central financial authority, meaning it can be transferred abroad in seconds with minimal oversight.

To safeguard your Bitcoin, it’s important to know when, why and how fraudsters target crypto investors – plus what actions you can take if you suspect a scam.

Below, we break down the types, warning signs and consequences of Bitcoin scams so that you understand the risks before investing in this cryptocurrency. Keep reading to discover how you can spot, avoid and report such fraud.

The cost of Bitcoin scams in Australia

Australia has been relatively shielded from widespread cryptocurrency fraud due to its stringent legal framework and smaller market. But Australian crypto platforms and their users are not immune to Bitcoin scams.

For example, CoinDesk reports a steady rise in crypto scams in Australia, coinciding with global growth in cryptocurrency. In 2017, Australians lost AU$2.1 million to such scams.

By 2018, scam incidents increased to 674, predominantly affecting those aged 25-35. The trend continued in 2019 with over 1,000 scams and losses exceeding AU$21.6 million. In 2022, Australians lost AU$148 million in crypto, primarily through investment scams.

In the US, cryptocurrency scammers swindled over US$1 billion from more than 46,000 people between January 2021 and June 2022, as reported by the Federal Trade Commission. And Bitcoin was the cryptocurrency of choice in 70% of cases.

Don’t fall victim to the same fate. Below, we list the most prevalent types of Bitcoin scams to be aware of if you invest in cryptocurrency.

Common types of Bitcoin scams to watch out for

 

Phishing

Phishing scams aim to access your Bitcoin account. Phishing involves hackers masquerading as a trustworthy entity to extract personal information through emails, texts, or fake websites.

Phishing emails appear to be from reputable companies but are actually from scammers aiming to steal login information. They may contain links that download viruses or request personal information.

These websites often mimic legitimate ones, with minor differences in the URL or spelling. Once a user logs in, their credentials are stolen, and their computer may be infected with ransomware.

Staying alert to the authenticity of each website you visit and the email you respond to is key to avoiding common phishing scams.
 

Fake Bitcoin exchanges and trading apps

Scammers often lure investors with promises of exceptional crypto returns – including more Bitcoin. The catch? This proposed exchange doesn’t actually exist, which investors only realise after losing their deposit.

To avoid this, always trade on recognised Bitcoin exchange platforms and research their reputation and legitimacy thoroughly before sharing any personal details.

Fraudulent crypto trading apps are another scam tactic. They often promote app downloads directly from a website, and while some may briefly appear on legitimate platforms like Google Play or Apple, they’re quickly removed. Be wary of apps with a lack of or overwhelmingly positive reviews on app stores.
 

Bitcoin investment scams

In a Bitcoin investment scam, the culprit poses as an investment manager and contacts potential investors. They may boast about significant profits from Bitcoin investments and promise similar returns.

To avail of their ‘offer’, you must pay an upfront fee. However, rather than investing this figure, they abscond with your money. They may also ask for personal identification details, ostensibly for fund transfers, which allows them access to your Bitcoin account.

Another common tactic is to use fake celebrity endorsements, whereby scammers create misleading endorsements using real images in false accounts, adverts, or articles, suggesting celebrities back certain investments with high returns.
 

Rug pull

In rug pull scams, fraudsters promote a new project, non-fungible token (NFT), or Bitcoin to gather funds from investors. The project is marketed through marketing and social media hype.

Once sufficient money is raised, they withdraw everything – devaluing the coins – and vanish the funds. Investors are left with worthless assets due to coded restrictions on selling.

Other deceptive practices involve fake websites, encouraging users to invest in a digital wallet that is, unbeknownst to you, compromised. At first, the value of the Bitcoin appears to rise, spurring further investment.

However, the scam unfolds when access to the account is suddenly blocked, the website shuts down, and the scammers abscond with your invested funds.
 

Jobs ‘trading Bitcoin’

By responding to a ‘Bitcoin trader’ job listing, you might unknowingly engage with a fraudulent or impersonated financial firm.

The role, requiring minimal weekly hours and offering substantial pay, might seem like it involves setting up various bank and cryptocurrency accounts under the guise of trading for the firm’s ‘investors’ or ‘clients’.

In reality, this activity may constitute money laundering on behalf of scammers, potentially leading to legal consequences.
 

Impersonation

Some Bitcoin scams involve the fraudster pretending to be an online romantic partner, job recruiter, or fake financial service provider.

Typically, they will ask you to transfer the cryptocurrency directly to their account, insisting that the payment must be made in this way. Once you pay the sum, they fall silent – and you never get your Bitcoin back.
 

Bitcoin blackmail

Blackmail scams are another common tactic, often conducted over email. The scammer threatens to expose compromising or sensitive information, such as your internet browsing history or private images, unless you hand over private keys or pay a specified amount of Bitcoin.

This straightforward yet often highly distressing experience can have emotionally and financially devastating consequences for the victim.
 

Fraudulent giveaways

Social media is rife with Bitcoin giveaway scams preying on the desire for quick gains. These fraudulent posts often involve fake celebrity endorsements to attract victims. Scammers promise to match or multiply the crypto sent to them, creating a false sense of urgency and legitimacy.

Clicking on these giveaways leads to a sham website that requests payment for ‘verification’ purposes. This not only risks the initial payment but also exposes you to potential theft of personal information and cryptocurrency through malicious links.

Warning signs of a Bitcoin scam

Before you invest in Bitcoin or engage with any entity or individual online, be aware of these red flags:

• Exclusively accepting cryptocurrency as payment
• Suspicious endorsements by influencers or celebrities
• Pushy investment advice from unknown individuals
• Poor spelling and grammar in communications
• Use of pressure tactics like threats or blackmail
• Job offers in the crypto sector that require upfront fees
• Offers of ‘free’ money
• Claims of ‘guaranteed’ high returns
• Vague details about the investment’s operations
• Crypto services that retain earnings for ‘tax reasons’
• Binding contractual terms
• Multiple transactions within a short period
• Unsolicited messages about crypto investments or requests for crypto payments
• Unexpected tokens in your digital wallet

Always exercise caution and due diligence in the crypto space. As with anything in the world of investment, if a Bitcoin-related offer seems too good to be true, it usually is.

How to protect yourself from Bitcoin scams

To avoid falling victim to Bitcoin scams, keep up with the latest scamming tactics and stay vigilant. It’s crucial to recognise the warning signs of a scam and ensure your keys are safe and secure in cold (offline) storage.

Other smart precautions include:

• Being sceptical of any social media ads and celebrity endorsements advertising Bitcoin
• Researching Bitcoin tokens or exchanges online with keywords like ‘scam’, ‘review’, or ‘warning’
• Refusing to share your private cryptocurrency keys, which are essential for wallet access
• Examining websites meticulously for signs of legitimacy, like accurate contact details, correct grammar and practical offers
• Being cautious of requests for cryptocurrency payments
• Staying alert for offers of ‘free’ Bitcoin or ‘high return’ investments with ‘low risk’
• If in Australia, checking for AUSTRAC registration numbers on Australian digital currency exchanges

If you are already investing in Bitcoin:

• Use private Wi-Fi when accessing your Bitcoin wallet
• Do not use unexpected tokens in your wallet
• Be selective when installing browser add-ons or software that links to your crypto holdings

Even with these measures, it is still possible to get scammed. Read on to learn what actions you can take if fraudsters target your Bitcoin wallet.

How to report a Bitcoin scam

Crypto scams, much like other investment scams, often span multiple countries and jurisdictions. This international scale complicates law enforcement efforts to track down fraudsters and makes it more challenging for investors to recover their investments.

In Australia, it’s recommended to report Bitcoin scams to the ACCC via its ‘report a scam’ feature. For victims residing outside Australia, these incidents should be reported to local authorities.

Also, it’s important to report a Bitcoin scams to your national fraud reporting platform (e.g., Australia – www.cyber.gov.au, USA – www.ic3.gov, UK – www.actionfraud.police.uk, Canada – www.antifraudcentre.ca).

If you’ve been impacted by a cryptocurrency scam, Bureaus FTC Report is ready to help. Our team harnesses advanced tracing techniques and decades of experience to unearth evidence essential for the recovery of your assets.

Have you been targeted by a Bitcoin scam?

If you suspect that a Bitcoin scam has targeted you, Bureaus FTC Report is equipped to assist. Renowned for our expertise in cryptocurrency fraud investigation and recovery, we boast a team of experienced professionals, unique resources, and an extensive international network.

These capabilities enable our investigators to gather intelligence, conduct advanced surveillance and hunt down perpetrators – ultimately helping you to seek justice and recover your assets.

Book a consultation now or learn more about our cryptocurrency scam investigation services.