How to Avoid Bitcoin Scams

Since bitcoin’s inception in 2009, it has grown exponentially making it a widely popular digital currency that is used around the world. Unfortunately, it is due to the popularity of bitcoin and its market cap growth rate that scammers are realizing the monetary benefits they could get from it.

According to Bitstamp, the first fully licensed bitcoin exchange, the bitcoin to USD market cap is more than $11.3 billion, with the cost of one bitcoin around the $708 mark, at the time of publishing. It goes without saying that the bitcoin space and its worth has attracted online scammers who want to get their hands on the digital currency by employing devious methods in the process.

Of course, regardless of whether you are a newbie in the bitcoin space or you’ve been dabbling in the technology for a few years, it’s always a good idea to keep yourself up-to-date on the bitcoin scams. Here we will highlight the existing bitcoin scams that people should be aware of and what you can do to avoid becoming a victim of one.

  1. Bitcoin Exchange Scams

These types of scams may not necessarily be easy to decipher simply because the organizations may have a high standing level within the bitcoin space. There are some, though, that do fall through the net. For example, in 2014, the digital currency exchange platform, Cryptsy, is reported to have lost 13,000 BTC and 300,000 LTC after the exchange was hacked; however, it then proceeded to fail to inform its users of the situation for fear of causing mass panic. This has led many to believe that Cryptsy is Mt. Gox’s junior.

Mt. Gox, the now defunct Hong Kong-based bitcoin exchange, grabbed headlines back in 2014 when it was revealed that around 850,000 bitcoins were stolen, at the time worth around $450 million. While 200,000 bitcoins have since ‘returned’, many users of the exchange are still awaiting an outcome for their stolen money.

What Can You Do: In this situation, the best course of action is to only use the services that you completely trust. Unfortunately, with the above exchanges they were, at one point or another, trusted exchanges.

So what can a person do?

One solution is that instead of putting all your eggs in one basket, why not split what you have into different wallets. This way you can rest assured that not everything you own will be lost if an exchange does get hacked into. Also, research the failings of exchanges such as Mt. Gox and you’ll see that there were warning signs beforehand. By knowing what these are you can keep them in mind when checking out other bitcoin exchanges.

Of course, before parting with your money it’s wise to proceed with a level of caution, and be mindful of any exchanges that simply avoid answering queries in an attempt to ignore a crippling situation.

  1. Phishing Scams

Surprisingly, phishing scams have been known to target those within the bitcoin space. In 2014, the popular digital wallet, Coinbase, was reported to have allowed mass phishing while leaking user information. According to a report, users were receiving emails asking them to make a payment to another user.

phishing locks

In July, following the disappearance of bitcoin mining company, HashOcean, with millions of dollars worth of users’ bitcoin, phishers attempted to get victims to part with their money claiming they could recover their stolen bitcoins. In a bid to lure unsuspecting victims they used fake websites, Facebook pages, and phishing emails.

What Can You Do: To avoid becoming a victim of a phishing scam, don’t click on any sources that haven’t been verified. If something doesn’t seem right to you, always proceed with caution. After all, it’s much better to be cautious in the first instance rather than finding out too late that you’ve unwittingly lost your money.

  1. Fake Websites

It’s believed that if you scan a document that has words scrambled up you can still read what it says as long as the first and last letter are in their right place.

So, when it comes to someone trying to make a fake website appear real they may use some part of the genuine website’s URL, but take out one letter. An example of this was revealed earlier this year when a Reddit user announced that they had lost bitcoins after using a fake website unknowingly. The user believed that they were using the digital currency exchange; however, it was only after realizing that there was a missing ‘F’ in the fake website’s URL that ShapeShift was notified.

Not only that, but the Hong Kong-based exchange, Bitfinex, had to alert its users of phishing emails this year after phishing emails were being circulated from an address that appeared to be one of its own.

What Can You Do: Avoid clicking on sources that haven’t been verified. Even if a website looks legitimate, always remember to check the correct spelling of the URL before proceeding.

  1. Ponzi Schemes

A good maxim to live by is ‘if it sounds too good to be true, it probably is.’ That’s certainly the case with Ponzi schemes.

In most cases, it’s easy how to detect a Ponzi scam, and yet while this is the case, people still fall victim to them.


Because the operators of Ponzi scams know what to say to get people involved: the promise of great return on investments (ROI) without needing to do much to achieve it. Gavin Andresen, a well-known bitcoin developer, is reported as saying that he believes that ‘bitcoin cloud mining companies will turn out to be Ponzi schemes.


In 2014, Trendon Shavers was arrested, and later sentenced to 18 months in prison, after his involvement in a bitcoin-related Ponzi scheme. Reports state that he obtained around 146,000 BTC from investors, amounting to around $807,380 during the time of the scheme.

Another Ponzi scheme that has since ceased was CryptoDouble. In 2015, it ceased all operations after promising its users’ that it would double deposits within 100 hours. It was reported that around 2,233 BTC, amounting to about $500,000 at the time, had been cashed out leaving thousands of customers out of pocket.

What Can You Do: As mentioned before, if it sounds too good to be true, then it probably is. Avoid investing in something that over promises on ROI that guarantees a return. Even if a bitcoin company has received positive reviews, don’t jump in straight away. Be wary and do your research beforehand. You’ll thank yourself later that you did if an investment that you originally believed to be true turned out to be a Ponzi scheme.


Unfortunately, as the world of bitcoin continues to grow grabbing the attention of people who are keen to invest in a new technology that promises great things, bitcoin scams will also remain a prevalent factor.

This does nothing to help improve the space and is more likely to hinder its growth as scam victims shy away from any further investment in the currency. Furthermore, a lack of regulation also means that it’s easier for scammers to target people in the bitcoin space.

As such, it’s unlikely that scams involving bitcoin will stop anytime soon; however, by being aware of the different types of scams it makes it easier for someone to avoid becoming a victim and losing potentially thousands of dollars, with no way of recovery, in the end.

Images from Shutterstock.