When you hear of crypto mining, you perhaps let your mind wander off to the wild Western fantasy of cowboys and adventurers shovelling dirt inside a mountain’s base – and sudden riches. The analogy is not all that far-fetched. There’s a lot of the Wild West in the crypto mining realm. It is every bit crazy and, as of now, sans regulation. The Wild West is where you’d expect scammers armed with audacious schemes smacking of shenanigans and skulduggeries. Small wonder that crypto mining scams are becoming enough of a nuisance to justify a systematic response from honest consumers. Top 4 Crypto Mining Scams would be alarming, but simultaneously, educational since tackling these, we would know the efficacy of our vigilance.
False coins, doubtful tokens, scammy ICOs: Crypto Mining Scams
A crowd of new cryptocurrencies launches each month, and besides these new tokens and coins comes a series of initial coin offerings, or ICOs. The enthusiasm among a broad pool of investors for these opportunities has grown, despite cryptocurrencies having been drubbed in 2018. All of these factors join together to attract scammers. After all, if investors have plainly given proof that they are willing to throw money toward a highly speculative cryptocurrency, they seem to be equally likely to invest in fraudulent tokens or ICOs. The prospect can be challenging for the cryptocurrency investor looking to make the most of the host of new investment opportunities while remaining safe from fraudulent ICOs and sketchy coins and tokens.
What lies behind the scammy ICO?: scrutinise the Crypto Mining Scam Team
Likely the most significant success factor for any ICO or cryptocurrency is the developers and administrative team behind the project. The cryptocurrency space is ruled by prominent names, with celebrity developers like Ethereum founder Vitalik Buterin capable of making or breaking new projects simply by having their names listed on a development
team. Unfortunately, hence, it’s increasingly the norm for scammers to dream up ersatz founders and biographies for their projects.
The best protection against this dishonest tactic is to thoroughly research the individual team members prior to your investing.
Beyond resolving whether the development team is real, it’s important to make an effort to see if their qualifications are up to scratch. For instance, do the founders have the experience they claim to have? Is it relevant to the current project?
Examine the token sale: scammy ICOs, crypto mining scams
Any ICO will hinge upon a token or currency system in order to ease the crowdfunding process. Legitimate companies and enterprises make the system itself and token sale’s progress undemanding for potential investors to view. Carefully scrutinize the token sale figures as the ICO is ongoing. Better still, watch the token sale over time to note down how it is progressing. If a company makes it unworkable for anyone to chart the progress of its ICO, this is a prominent red flag.
Don’t get caught unawares by scammy ICOs: the Crypto Mining Scam ICOs
And if you want to get in with the minimum of fuss, the easiest option for the average person is to purchase coins or tokens in an ICO. There’s a huge zeal for new cryptocurrencies – in the first half of 2018, ICOs raised a total of US$11.69 billion – and with many new buyers having a bare minimum knowledge of how the crypto industry works, it’s the comfiest nesting ground for scammers.
Case in point: scammy ICOs, crypto mining scams
In April 2018, the Pincoin and iFan ICOs, run by the same Vietnam-based company, are held to have cheated 30,000+ investors out of a combined total of US$660 million.
iFan was meant to be a social media platform for celebrities, and Pincoin vouchsafed 40 percent monthly returns to investors. However, both were later proved to be multi-level marketing (MLM) scams.
Android crypto-mining apps: crypto mining scams
This July itself, we came to the knowledge of more than 170 android apps defrauding crypto miners. The apps were designed just to steal money from crypto miners. The apps scammed an excess of 93000 folks, making away with at least $350000. The swindled were buying apps and ancillary fake updates and services. The investigators categorized these shady apps into ‘BitScam’ and ‘CloudScam’. The apps were undetected for a long since there was hardly any activity they could be pinned on. Truth to tell, these apps do not do anything at all – let alone anything malicious.
How crypto mining attracted Android app scammers
Crypto mining harnesses computer processing power to solve complicated math puzzles that verify crypto transactions. Miners are subsequently rewarded with a small crypto amount.
There are a couple of mining strategies. One is concerned with mining pools, where individuals compute to get crypto. When cloud miners rent cloud computing power, we have something, not unlike cloud computing. Owing to the latter’s speed and simplicity, it was relatively easy for scammers to set up a crypto mining service.
How the scams ran: crypto mining scams
Most scammy apps were paid, permitting scammers to pocket the money from app sales. The apps also gave subscriptions and services that could be paid for thru the Google Play in-app billing system.
Upon logging in, an activity dashboard would appear displaying the hash mining rate besides the number of coins they have earned. The hash mining rate is the quantum of computing power being contributed to the network via mining. The hash rate would generally be meager so as to get users to purchase upgrades vouchsafing speedier mining rates.
Investigators found the apps display an imaginary coin balance rather than the number of coins mined upon analyzing the code and the network traffic. The displayed value is just a counter gradually incremented in the app.
As regards BitScam, users are provided with the option to purchase virtual hardware to speed up the mining rate.
Besides, apps were also designed so that users were not permitted to take back any coins until they reached a minimum balance. And even when that quantum was reached, users were not permitted to draw back coins.
The app would display a message to the effect that the withdrawal action is pending. However, unbeknownst to the user, it resets the coin balancer amount to zero. All this – without transferring any funds to the user.
BitConnect: high ranking among crypto mining scams
In its heyday, BitConnect had a market capitalization value of close to $2.6 billion. BitConnect collapsed on January 16, 2018. From a daily open of $255.91, it plunged to $19.28.
BitConnect claimed they could yield up daily returns 0.5% -1%. Their bot, they claimed, could take advantage of Bitcoin volatility. In October, they made the unsubstantiated claim that they could generate an average daily return of 0.89% over the preceding 6 months.
Those considering buying into BitConnect at that time should have spotted the following red flags: whatever you invested was tied up for between 120 to 299 days; it vouchsafed assured returns on investments; in many Reddit posts, BitConnect promoters were connected to an MMM or a Ponzi scheme; a profitable affiliate program drive their platform.
Symptoms of a Ponzi scheme
BitConnect drew novice investors with promises of high daily returns. BitConnect subsidized capital withdrawals of novice investors thru themselves or existing investors who have not withdrawn returns or capital. BitConnect promoted new users’ platform adoption through evidence that the platform gives results to users who have withdrawn capital and a percentage-based referral system.
A thwarted investor opened up a suicide hotline for those devastated by BitConnect’s crash.
OneCoin: that took the cake from amongst the crypto mining scams
Dr. Ruja Ignatova, Bulgarian by birth but with a successful immigrant background in Germany, held a Ph.D. in European private law from the University of Constance. At one time, she had been a McKinsey & Co employee. Along with brother Konstantin and one Sebastian Greenwood, she managed to develop a cult around what she christened, the ‘Bitcoin Killer. In 2017, she disappeared with a massive chunk of the unbelievable $4 billion. Only Chinese authorities have claimed to have recovered a fraction of the money. In addition, a couple of One Coin promoters were murdered in Mexico, allegedly by thwarted investors.
The cult was built to trap willing investors who wanted to believe in the scam.
Investors could opt for any amongst a number of education packages. Each package had tokens to mine OneCoins with. An internal exchange was projected, while it was non-existent. That it was a Ponzi scheme is evidenced by investors’ trading OneCoins with the company, not with other users. For recruiting others into the program. Investors were rewarded.
The biggest MMM scheme amongst cryptocurrencies: crypto mining scams
A multi-level marketing scheme, the scam that was OneCoin had no blockchain at all, no exchange. Here was just a database of tokens and the investors who bought them. Dr Ignatova vanished. Some say she disappeared with $15 billion. Conservative estimates say the figure is $2 billion. Her brother was awarded 90 years in prison. A lawyer involved with her ‘cult’ was awarded 50 years’ imprisonment. He pleaded guilty to money laundering. All this grief is due to greed. The Doctorate manipulated the investors, then made off with billions.
Protecting yourself from crypto mining scams
- Two-factor authentication: If you’re utilising a crypto wallet or exchange compatible with 2-factor authentication, do not forget to enable this feature before depositing any funds. It’s simple to install and is the source of an extra layer of account security.
- Use a cold wallet.
A “hot” wallet is connected to the Internet, whereas a “cold” wallet is one that’s held offline. Storing your crypto offline in a physical cold wallet is a far more secure option relative to using an online wallet.
- Stay loyal to regular providers.
Avoid new and untested platforms. Rather, let the early adopters take risks and ensure you don’t have any dealings with an exchange or wallet until you can make sure it’s legitimate.
- Ascertain your PC is protected against malware by keeping your antivirus software up to date.
- Double-check addresses – always!
Don’t forget to scan the URL bar to look for the HTTPS and “secure” lock symbol, and remember to double-check the URL to make sure you’re visiting the correct site.
- Your private keys are not to be shared
You need your private key to access your crypto holdings. Hence make certain you never file details about any of your private keys to a third party.
- Report scams
Restrict the operations of the scammers by doing your bit for community security. If you smell a rat, report your suspicions to
- National Cyber Crime Reporting Portal
- National Cyber Security Centre
If something is too good to be true, it probably is. There are regulations and rules for a reason. Volatility too cannot be milkweed to such an extent that all investors will strike insanely rich wealth. So much for great expectations. Even on a smaller scale, crypto mining scams can yet hurt. So be vigilant and follow basic precautions. Treat cryptocurrencies as a new investment instrument. Earn within moderation.