Scammers are always on the lookout for new and innovative ways to trick honest people into sending them money. And with bitcoins known for being agile and volatile, to say the least, the risks concerned when dealing with digital currencies or monetary mechanisms are constantly on the rise.
Thus bitcoin users need to look out for potential red flags — or as we say DYOR (Do Your Own Research) — before either sending bitcoins to a person you have just received a text message from, or investing to make a quick profit. It is imperative that users make sure they are sending their bitcoins to the right place.
What are the most common ways you can be spammed? Here’s how to detect them:
1. Social Media
Social media scams have recently been on the rise. Not only for bitcoins, but also for other daily things such as deals or products. People are contacted through WhatsApp, Instagram and Facebook as the most common way of interaction, and are tricked into sending bitcoin in return of a product or service.
There are many legitimate uses for bitcoin. And as a fast and borderless payment method, it has many advantages over traditional fiat transfers. However, users need to be certain that on the other side of that contact, there is a legitimate service or person.
Some food for thought before becoming involved:
- Was I contacted via social media? (Instagram, WhatsApp, Facebook)
- Is a wallet address provided via social media?
- Who does the wallet address belong to?
- Can I look up the name of the company being mentioned and/or marketed?
- Is the service or product legal in your area? (e.g pharmaceuticals/prescription medication)
- Is the company mentioned legal or does it require a license to operate?
- Does the service you are paying for have a record of accepting cryptocurrency? Such as Medical supplies, Hospital bills, ‘Working on an Oil Rig’ and so on.
Not every purchase or activity is going to be red-flagged or fraudulent, but the above are common tactics that third parties use to convince you to send them your hard-earned bitcoin.
2. Imposter Websites
Not all websites are fraudulent. Some are genuine and legitimate and can actually help you in making profit as returns. Nonetheless, there are many fake websites claiming to be successful traders, promising huge returns for a very small investment or activity which may be more alluring to you.
You may be following a solid tip through a friend of a friend with experience in trading, only to accidentally become a victim unknowingly. Sometimes you are provided with a deposit address through social media, promising to trade on your behalf, or you may also be led to believe you are helping a dear friend of yours. Others may contact you via a third party website. These can look very similar to legitimate websites, but upon closer inspection, it is easy to identify that they may not be so genuine after all. Websites can be created very easily these days, and very cheaply too. It is important to do your research and understand the ultimate destination of your bitcoins.
Some questions to ask yourself about a potential service:
- Do they promise extremely unrealistic or high gains?
Trading can be profitable, but one needs to dedicate enough time to understand it and gain skills. Be careful of anyone promising something that sounds ‘too good to be true’ upon opening an account, because it probably is.
- Are you being asked to deposit more so that you can withdraw your ‘profits’?
This is a common tactic to get you to deposit more funds into your account. You can see that there are profits waiting and if not, you are being told so over WhatsApp or Instagram. Yet, we would know very little about the ‘taxes’ to be paid or other expenses, before one is able to withdraw profits, — unless all communication with that website has been closed off, never to be heard of again.
- Do you have access to your own account or is there someone else that is handling it on your behalf?
Be sure that you are in total control of your own account and that you are the sole person to access it. Never give your personal and sensitive data to a third party, whether over the phone or online. This also includes your 3DS/VBV.
- Is this a legitimate business?
Some website services will use the registration details of a different company to appear legitimate, or that of a company that no longer exists (both of which are illegal). Sometimes they are registered in an offshore location which although may be for valid reasons, many unlicensed businesses do so for illicit activity. Make sure you read the fine print, where the business is located and registered, while knowing there are no restrictions with regards to jurisdiction in the country you reside in when it comes to using the service.
- Where is the business located?
Always look at where the business is located, whether it is a virtual office, or a house in the countryside. It can be a vending machine in a strip mall. The location will tell you a lot about whether this is a genuine business or not.
- How can I contact them?
Make sure that contact details are clearly listed including the telephone number. Run an online search on that telephone number to check if it is being used with other websites related to the service you are looking at, or whether it is showing up as something else.
- Is this a well-made website?
Look at the quality and design of the website itself. This includes the images used, the structure and the feel. Some are easily copied from Google or use dummy pictures, while any reference listed including terms and conditions may be plagiarised. By comparing professional and well-known websites to the one you will be using is a good indicator of whether it is an imposter website, or a long-term professional business website.
- How long has this website been on the market?
Fraudulent sites only exist for a few months before they are shut down, or their website domain is about to expire to create more at a later stage. A new website which has been on the market for few months and has a lot of Facebook visitors, multiple views and offers services in multiple countries might be a good indication that it is probably a fake website with fake boosters to hit a vast market, leading you to believe it is genuine.
- Is there any social media presence for the website?
A consistent and long social media presence is a good indicator of whether the site is genuine. It is a good idea to check their social media links. Often, fake sites will redirect you back to their homepage because they have no social media presence at all, while others post a few generic photos upon opening a social media account. Do not be afraid to explore the site properly.
Bitcoin is a decentralised and anonymous system of payment, which may provide certain services that fiat does not. You are responsible to properly research before engaging in an activity, whether to start a hobby or to make profits, in a way or another. Remember that all bitcoin addresses are anonymous — you cannot know who the owner of that address is unless it is a very well-known service and/or company. Once you send bitcoin to a wallet of your choice, you cannot reverse it nor can you get your money back.
A chargeback would be impossible to make on a transfer and if you do that on the transaction that provided you the bitcoins, it is a high probability that it will be very time consuming and expensive since by providing enough compelling evidence, the merchant is surely to win as it was not the provider of the bitcoins that did not render the promised service.
In case you raise it as a fraud, the issuing bank will ask questions and end up dismissing it since a transfer does not pass through the credit card service provider, but is a movement of cryptocurrency, in this case, between parties.
There is no shame in being the victim of one of these sophisticated and predatory operations. Nonetheless it is important to learn from mistakes and know exactly what and where to look for to avoid from happening again!