Avoid these Bitcoin Scams

Read our article on the most common Bitcoin scam here.

It’s important to note that these are scams that have existed for much longer than Bitcoin has been around. Most have been adapted to take advantage of this new payment form, but have previously and are still conducted using gift cards, Western Union/MoneyGram, money orders, or even bank wires. Scammers using Bitcoin will often “helpfully” point out nearby ATMs from which you can send them money. They like Bitcoin because transactions cannot be cancelled, reversed, or otherwise refunded once broadcast….

Bitcoin Scams to Avoid

Visit Fraud.org to read full descriptions and find other great resources.

Warning: Scam artists can spoof or fake ANY telephone number or email address they want!

Do NOT rely upon caller ID at all to determine legitimacy.

Impersonation scam - Government

Social Security Scam

A very common form of the impersonation scam is where you will receive a call supposedly from the Social Security Administration, often claiming that your SSN has been “suspended” or otherwise part of some criminal activity. They will probably threaten jail time and then demand payment via a local Bitcoin ATM. The perpetrators often have another scammer call you from your “local police” to corroborate the story of the first. This particularly awful fraud has impacted many >>> JUST HANG UP and CALL US immediately! Again, never send bitcoin to anyone pressuring you to do so.

IRS Scam

Some government scams take the form of demands from the IRS to pay debts owed. The scammer can contact you through any communications method, including phone calls. This type of scam can be potentially very costly for the victim, including a high risk for stealing sensitive personal information. The scammer may threaten you and will sometimes provide details to pay via bitcoin. Of course, Uncle Sam does not yet accept bitcoin. Never pay supposed IRS debts via an ATM!

Money Muling

What is a money mule scam?

  • This is any situation where you are receiving money from someone else (physical cash, personal or cashier’s checks, bank-to-bank transfers, Venmo/Paypal, bank-to-bank transfers) and purchasing bitcoin on their behalf. This may also involve a “cut” or fee that you get to keep yourself for your “service”.

    This situation is highly dangerous and will subject you to further prosecution for participation in money laundering. The likely reason someone would pay you to purchase bitcoin for them is because they want to obscure the source of past theft, fraud, or other criminal behavior.

    Do not help them!

Impersonation scam - Utilities:

• Threats to shut off serviceSomeone pretending to be from your utility company (usually electric) will call or email you to claim you are late on a bill. They will then threaten to shut off your electric or other utility service if you don’t pay immediately in bitcoin. Just HANG UP, take a breath, and find the number for your actual utility company who you may call for the real status of your account. Scammers count on you being panicked and willing to follow their direction without question. Don’t talk to them and don’t call any numbers they give you. Refer to your utility bill or website for actual contact information. See also: www.utilitiesunited.org

Fake Income Scams

  • Check cashing scam: This category also includes fake jobs or interviews. Someone remote will offer to pay you via check (sometimes other forms) and expect you to send bitcoin to another destination for some believable reason. Excuses include sending money to clients, purchasing a wardrobe, or paying for transportation. Not only is this potentially money laundering, but most likely you will see the original check bounce and only you will be responsible for the lost cash or bitcoin. In short, if someone is sending you money just so you can send money somewhere else, be very suspicious.

  • Fake grant scam: Someone contacts you to tell you that you’ve been awarded a grant or some other giveaway, usually by a government agency. To receive this award, you have to first send bitcoin through an ATM to pay for the “processing fee”. They will disappear and leave you high and dry. Other variants ask you for checking account details.

Scams of the Heart

  • Relationship scam: Victim believes they are in a relationship with someone they either rarely meet or never meet and is often in another country. Scammer asks them to help pay for urgent expenses, including costs of traveling to see the victim, equipment for a business, customs fees, medical bills, and so forth. Bitcoin is especially applicable here since it is often used for cross-border payments. Unfortunately, relationship scams can go unnoticed for quite some time and result in a devastating betrayal.

  • Grandparent scam: Victim is contacted by a supposed relative, often a grandchild, cousin, niece, or nephew who needs bail money or is otherwise in urgent trouble. After briefly describing the problem the scammer cuts off communication except for payment instructions, intending to panic the victim. This scam particularly impacts the elderly. We would suggest taking your time and verifying the story with other relatives before sending any money.

Investment Scams

This category involves some of the most common types of scams and those that are the hardest to recognize (before it’s too late), but there are still signs….

  • Ponzi / Pyramid schemes: Victims will see ads for investment programs promising unusually high rates of return. Claims are often made to behind-the-scenes forex or crypto trading. Many also advertise their own new token as being a “better Bitcoin” where you can get in on the ground floor–the implication being that it will, too, experience Bitcoin-like rates of explosive growth. Unfortunately, virtually all of these are scams. The investment principal from later investors are used to pay out the earlier investors until the whole scheme collapses. One of the biggest warning signs are promises to pay a specific percentage of earnings daily or weekly. Pyramid schemes are often tacked on in the form of referral bonuses. They rely upon ever expanding downstream networks of distributors to promote the scheme and are also doomed to collapse.

    Bitconnect is a famous example of a Ponzi and Pyramid scheme from 2017/18 whose token lost 99% of its value following state regulatory pressure (1,2,3). Other notable scams include Onecoin, Gladiacoin, and USI-Tech.

    Ponzis will always exist in one form or another and wreck many naive investors’ lives. Don’t let it happen to you.

  • Initial Coin or Exchange Offerings (ICOs/IEOs): ICOs/IEOs are the initial sale of a new token to the public, analogous to an Initial Public Offering for stock. Normally taking the form of ERC-20 tokens created on the Ethereum network, ICOs became a popular and novel way to raise funds in 2017. While some forms of ICOs may be legitimate, the legal consequences surrounding these investments are still poorly understood, with many of them likely to be considered securities by the SEC. Regardless of their regulatory status, scammers make use of ICOs in attempted “pump and dump” schemes by the hundreds. It was widely reported that nearly half of 2017’s ICOs have already failed. Please do considerable research before participating in any ICO, and don’t feel pressured by limited-time token sales.

Fake Merchandise Scams (more info)

These are listings for “great deals” on typically high-value items on Craigslist, eBay, OfferUp, Amazon, and other places where individuals can post ads. They are most likely selling….

  • Apartment rentals / down payments: Scammers either point to legitimate listings on Airbnb or other listing sites, create copycat websites that look like these sites, or possibly create their own fake listings just to lure people into a conversation outside of a legitimate rental website. Once the victim communicates with them the scammer will give the victim instructions via email or some other channel to pay for their “reservation” or “down payment” with bitcoin. We’ve also seen EasyRoommate and HomeAway affected by this.

  • Tickets for concerts or other events: Scammers will list on Craigslist or other individual ad sites fake or non-existent concert tickets sold for bitcoin. As is usual in these cases, the scammer will just disappear, and you will be out hundreds of dollars. We’ve seen theme park tickets also the subject of this scam.

  • Used cars / eBay Motors scam: The scammer will post a used car for a very low price on Craigslist, reusing photos and data from some older or legitimate listing elsewhere. The scammer will often tell a personal story involving the death of a family member or military deployment forcing them to sell the car. They will also promise to ship the car to the buyer, offering no way to meet in person. What’s worse is that they will go to great lengths make their emails look real, but the car doesn’t exist, eBay has no knowledge of it, and the victim will simply lose their money.

eBay, Amazon, Airbnb, Ticketmaster, and many other major retailers DO NOT yet accept bitcoin!

…and if they did, they would do so only through their own secure websites.

Unsure about a payment? STOP! …and give us a call (312-690-4466) or message. We can’t determine if your destination is legitimate, but we can help you assess the risk that it may not be.