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Digital Fraud & How to protect Yourself: From ICOs to Bitcoin Scams

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Digital fraud continues to grow apace. More worryingly, the increasing variety and sophistication of the scams themselves has seen the number of people falling victim to scams growing just as fast. And we are no longer just talking about standard phishing. Today’s digital criminals are highly developed and extremely quick to jump on the latest online trends to take full advantage of every opportunity.

As dispute resolution specialists we are often the first port of call for clients who have found themselves in particularly difficult situations. Unsurprisingly more and more of these situations involve digital fraud and we wanted to use this opportunity to outline some of the fastest growing and most regular scams and offer a little advice as to how you can separate scams from genuine opportunities.

1. Binary options (also known as all-or-nothing options, digital options and fixed return options) trading

A binary option is basically a financial option in which the pay-off is either a fixed monetary amount or nothing at all. There are two types of binary option:

§ A ‘cash-or-nothing’ option which will pay a fixed amount of cash if the option expires in profit

§ An ‘asset-or-nothing’ option which will pay the value of the underlying security

It is the ‘or nothing’ that’s attracted fraudsters and there are now hundreds of trading platforms operating outside the regulated financial markets.

The scam is simple. A fake company owns a website that makes them look like a legitimate binary options broker and offers users access to a ‘live’ trading environment whilst promising accuracy, transparency and guarantees designed to settle the nerves of a would be investor. The investor then makes an initial deposit which they will see grow online at which point they’ll be asked to deposit more.

Eventually, despite the appearance of healthy growth, the website will suddenly fold taking all of your deposits with it. Alternatively if you have asked to withdraw your investment, you may be asked to top up your account to take your balance to the minimum required to make a withdrawal … at which point the website will fold taking all of your deposits with it.

If you fall victim to a binary options scam, resolution can be tricky. As these are fake companies, it’s very hard to find out who the owners are never mind begin the process of recovering your money. Waters are muddied further by the fact they will most likely be operating outside the UK (Israel has the dubious honour of housing the majority of these fraudsters) and operating in an area with little or no regulatory environment.

2. Initial Coin Offerings (ICOs)

The easiest way to explain it is that it’s a type of crowdfunding that has grown out of the current growth in popularity of Bitcoin and other cryptocurrencies. However instead of providing a shareholding in return for an injection of capital, the company seeking investment will release a fixed number of its own crypto-tokens then sell those tokens to investors. Usually the investors will pay for these tokens in Bitcoin but some will accept the major international currencies.

There is a common misconception that an ICO is the same as an IPO (an Initial Public Offering) but there are actually two major differences:

§ In an IPO the shares purchased by an investor are representative of their voting power and their level of ownership. This isn’t always the case with an ICO and just having the company’s cryptocurrency doesn’t guarantee voting or management rights; they are just something to be exchanged for other currencies at a later date.

§ As IPOs are an integral part of the world’s trading exchanges, they are heavily regulated. As cryptocurrency crowdfunding is new it does not yet enjoy the same protection which means any involvement carries as much risk as opportunity for an investor.

As this is still a developing area and an area that’s creating a bit of a buzz in the tech market, digital fraudsters have been quick to take note and fake investment opportunities are springing up at an increasing rate. Experience of resolving disputes after the fact has taught us a few lessons as to how to tell a real opportunity from a scam so if you are attracted by an ICO we would urge you to:

§ Make sure your investment will provide all of the ownership and voting rights you want

§ Understand the risks and if you are uncomfortable making a significant investment via a platform that sits outside the usual market regulations, this may not be for you

§ Do your due diligence and make sure the company offering the ICO is a going concern, has a recognised legal entity and that the project you want to invest in has the required research and staffing behind it

§ Make sure any investment you make will be is deposited into an escrow wallet and that at least one of the keys to that wallet is held by a trusted third party

§ Ensure you have a complete and professionally drafted set of legal terms and conditions signed both by you and by the company you are investing in

§ Ask around or search the internet in case no one has ever heard of the company launching or there is no record anywhere of the company and/or the entrepreneurs behind it

§ Ask to see both the business plan and a record of any work-in-progress (WIP); a negative or evasive response should be treated as a red flag

3. Bitcoin scams

Having hit its highest ever price, Bitcoin is currently in greater demand than it has ever been which means criminals have never been as active in finding different ways to exploit it for their own gain.

As it is so attractive the range of Bitcoin scams has grown almost impinged and the rise and rise of social media has provided the perfect platform for scammers to promote every variation. The list of scams we have come into contact with includes:

§ Malware downloads

Hugely attractive Bitcoin transactions are used to persuade you to download damaging software designed to damage or gain access to your computer.

§ Bitcoin phishing ‘impersonators’

Criminals use the Bitcoin logo to gain a victim’s trust then, once that trust is established, a phishing website entices users to enter their private Bitcoin key to check it exists in their database then the key is then phished and the associated account is emptied.

§ Bitcoin-flipping

After you pay a joining fee to exchange bitcoins and double any investment you make within a very short time-frame you find your bitcoins have been simply stolen.

§ Bitcoin pyramid schemes (also known as Multi-Level Marketing or MLM Schemes)

A high level of return is promised for a low level investment but the size of the return is linked to you sending the links to your friends to get them to join too. However once a few hundred people have signed up paid the joining fee, the scheme folds.

§ Fake Cloud Mining Services

Bitcoin “miners” validate transactions in the blockchain using complicated mathematical equations in exchange for new bitcoins. Scammers promise the same service then collect the ‘mining fees’ without actually doing any mining. Initially they will probably pay out a few small amounts but these soon dry up as the scammer disappears with the funds.

§ Bitcoin Investment Schemes

Again these scams promise high levels of return in return for providing low levels of capital for ‘investors’ who purport to trade digital currency. Like cloud mining scams they tend to pay out a few small returns then the payments stop and the scammer absconds with everything their victims have invested.

§ Fake Exchange Scams

Bitcoin exchanges (marketplaces that trade Bitcoin for traditional currency or other cryptocurrencies) are legitimate but fake exchanges are springing up every day. The fake exchanges will ask users to deposit funds to purchase Bitcoin whilst enjoying lower transaction fees than regular exchanges. The only thing is as these exchanges aren’t real, they never realise the promised return.

§ Bitcoin Donation Scams

In the wake of recent events, this is without doubt the most cynical type of scam. More and more scammers are creating fake donation pages asking people to donate in bitcoin rather than via better policed platforms like PayPal.

So how do you protect yourself? With all of these scams there is a basic rule, if it looks too good to be true, it probably is. If someone sends you a hugely attractive offer out of the blue, you need to immediately be on your guard.

Here are 4 basic rules we would urge you to follow:

§ Never trust any unsolicited email or social media post

§ Never click on any associated URL however high the potential return is claimed to be unless you know and trust the sender (and remember it’s now easy to replicate a social media account)

§ Never engage with or provide personal information in response to an email or social media account until you have checked to make sure the sender is 100% genuine.

§ Never enter into any type of financial transaction on the back of an email or a direct message on social media until you have completed all off your due diligence.

And if you do fall victim never try to resolve the situation on your own.

These may be criminals but they are highly sophisticated criminals and will be hidden behind layers of cleverly created camouflage. Always engage an experienced lawyer with a proven success record in resolving cross-border multi-jurisdictional disputes involving digital fraud. If you are going to recover lost funds, putting the right strategy in place immediately will be key to your success.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Richard Howlett is a lawyer at Selachii Solicitors in London. He acts for businesses and individuals in a range of disputes that include complex litigation, fraud, bitcoin and cryptocurrency.




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1 Comment

1 Comment

  1. beckyvn

    June 20, 2017 at 2:34 am

    I am is the victim of Bitcoin scam in just a week ago ! The story they (Scamers) make is : Bitcoin could be hacked ! As their explaination : When you send them a mount of BTC, they will hack it by the double (or 3,4… times) the amount by made many complicated techologys in transaction …
    Simple, If you send them 1 BTC, they will return you 5, 6 or even 10 BTCs !
    Greedy make us be blind. I lost 0,3 BTC for them.
    So, My lession is NEVER try to become a Smart ass in BTC. Don’t find any hacked method in the HACK FORUM / WEBSITE. They all scamers !
    Here are two websites which the Admin and fake members are scamers :
    1. http://www.crdforum.com
    2. http://hckleackedworld.com

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Analysis

Crypto Update: Bitcoin Blows Through $7000 but Altcoins Still Lag Behind

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The relief rally in the cryptocurrency segment continued in earnest today, as Bitcoin still lead the way higher posting its best daily performance since April. The most valuable coin stole the show, although the whole market blasted higher, with the total value of the coins getting close to $300 billion, up by around 20% in a matter of days.

While the segment is still not out of the woods, BTC triggered a short-term buy signal in our trend model, as it overcame major resistance levels for the first time since May, finally showing some technical progress. That said, most of the majors are still stuck in, or right at the top of their trading ranges, and besides Bitcoin, buy signals are few and far between even considering the smaller coins, as correlations are still very high.

Trading volumes were also the highest in months, as especially Bitcoin triggered automatic orders while surging through several strong resistance levels. Bulls would still need further coins to join the break-out and fro now the long-term setup is still just little changed.

BTC/USD, 4-Hour Chart Analysis

BTC cleared the $6750, $7000, and $7350 levels in a bit more than an hour, and the epic short squeeze settled down near the latter resistance, for now. The coin is now on a short-term buy signal, and should a higher low form in the coming days, a new short-term uptrend could be established.

The coin needs to stay above the $7000 level to keep the signal intact, and given the relative weakness in Altcoins, the long-term outlook is still mixed. Resistance is now ahead between $7650 and $7800, while further support is at $6500.

Ethereum at $500 as Ripple Tests $0.51

ETH/USD, 4-Hour Chart Analysis

While Bitcoin is already above primary resistance, Ethereum is trading right at the $500 level, leaving the short-term trading range intact. The coin is close to triggering a buy signal, but it remains relatively weak and traders should wait for follow-through before playing a possible trend change. Primary support is still found at $450, with other levels at $420, $400, $380, and $360, while further resistance is ahead between $555 and $575.

XRP/USDT, 4-Hour Chart Analysis

With all of the majors registering large gains, and even some the recently weak coins like LTC, XRP, and Dash are trading near key resistance levels, further short-term buy signals could pop up in the segment, but until a confirmed new uptrend, traders should remain cautious with new positions.

As an example, Ripple is trading slightly above the $0.51 resistance currently, but a break-out is not yet confirmed, and the trading range remains dominant. Further resistance levels are ahead at 0.54 and $0.575, while support is now found at $0.49 and $0.45.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 293 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Bitcoin

Update: Bitcoin Price Spikes 8% in One Hour as Momentum Builds

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The bitcoin price spiked on Tuesday shortly after Hacked predicted a possible bullish breakout for the world’s largest cryptocurrency.

BTC/USD Price Update

Bitcoin is up 10% over the last 24 hours, including an 8% spike between 13:39 UTC and 14:24 UTC. According to CCN, the currency peaked at $7,483, its highest in five weeks.

The bitcoin price would later consolidate around $7,340 for a total market capitalization of $126 billion.

Just a few hours earlier, Hacked predicted that an imminent breakout was likely after prices breached the 20-day and 50-day moving averages. At the time, the Relative Strength Index (RSI) was in the mid-60s, which confirmed the bullish pattern.

Crypto Market Rallies

In typical fashion, the broader cryptocurrency market followed bitcoin’s upward trajectory, with the majors reporting 24-hour gains of between 6% and 9%. The total cryptocurrency market is now valued at $292 billion, the highest since June 12.

Trade volumes have also spiked, reaching $17 billion over the past 24 hours. That too is the highest level since late June.

As Hacked previously reported, cryptocurrencies are being propelled higher on speculation that major institutions are planning to enter the blockchain arena.

On Monday, it was also reported that Coinbase received regulatory approval to start listing so-called security tokens, becoming the first U.S.-regulated platform to do so. The approval was granted by the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority, which felt that Coinbase’s strategic acquisition of three companies was enough to open regulatory pathways to securities listings.

The acquisitions included Keystone Capital Corp., Venovate Marketplace Inc. and Digital Wealth.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 499 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Bitcoin

Frenzy to Get Bitcoin ETF Listed Is Clogging Up the SEC’s Email

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The Securities and Exchange Commission is apparently fielding a tidal wave of messages from crypto-currency enthusiasts after an exchange recently sought approval to list a Bitcoin ETF.

It has been three weeks since the SEC first asked for feedback on Cboe Global Markets Inc.’s request to change its listing rules and allow a crypto exchange-traded fund.

Since then, more than 90 individuals have submitted comments. That’s 10 times the number of responses the SEC previously received when it asked for opinions on another Bitcoin ETF listing back in April. It is apparent that the appetite for such a product is far higher then before.

The over-enthusiasm of the blockchain community is also spilling over into other areas of regulation. For instance, out of 19 of 21 comments left on the agency’s potential ETF rule change are desperately begging for the Bitcoin fund. Furthermore, the actual proposal for the ETF doesn’t mention Bitcoin, crypto or blockchain on any of its 286 pages whatsoever.

The SEC has spent much of the last 12 months preoccupied with damping attempts to bring a Bitcoin ETF to market.

After the currency’s precipitous climb to more than $18,000 last year, the commission in would-be issuers to withdraw their applications until asset managers could reliably answer a series of questions on custody, liquidity, market manipulation, valuation, and arbitrage. Bitcoin has since fallen to around $6,600, although it was rallying all of yesterday.

Although there were many alternately entertaining and informative comments, the commenter who best summed up the fervor of crypto left his comment under the pseudonym, “Noah’s Ark of Crypto.”

He said, “To all the Peter’s Bob’s, Linda’s and Nancy’s reviewing this bill, this all comes down to one thing: Innovation. Do you want to be at the forefront of historical financial technology or do you want to be left behind as the plebs of the western world?”

Brutal. But potentially warranted.

A more serious take was left by an analyst ostensibly employed by analyst firm Ernst Young. The commenter wrote, “Creating regulations for crypto ETF’s allows for certainty and reliability to emerge in a market that desperately needs it.

As the rise of crypto use-cases becomes more prolific it is of the utmost importance to the crypto community, as well as in the best interest of the United States financial system at large, to engage in drafting regulations to mitigate fraud, corruption, and dubious practices.

The SEC, coupled with other levers of regulation such as FINRA, hold the largest opportunity to propel cryptocurrency to new all-time highs by shoring up uncertainty in the market. Please don’t squander this opportunity. Thank you.”

Both comments seem to share the assessment that if the SEC does not relax its oppositional stance the only losers will be the United States relative to other countries.

Since this new filing was released for comment, the SEC has also postponed a decision on another prospective Bitcoin-related listing change until later this September.

Both requests were made by Cboe, which has repeatedly urged the SEC to consider approving crypto ETFs. It will be interesting to observe if the SEC has changed its mind and/or will bow to public pressure.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Hacked.com and its team members have pledged to reject any form of advertisement or sponsorships from 3rd parties. We will always be neutral and we strive towards a fully unbiased view on all topics. Whenever an author has a conflicting interest, that should be clearly stated in the post itself with a disclaimer. If you suspect that one of our team members are biased, please notify me immediately at jonas.borchgrevink(at)hacked.com.

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