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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.

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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

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§ 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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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

Technical Analysis: Cryptocurrencies Start Week on a Quiet Note as NEO Shines

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The broad Bitcoin-led correction continued to dominate trading in the crypto-segment throughout the weekend, as the most valuable coin drifted sideways above the key technical level at $13,000, with dwindling trading volumes.

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BTC remains in a declining short-term pattern, although the digital currency still holds well above the mini-crash lows from December, spending almost a month now in the daily range of the year-end plunge. We still expect the largest coin to complete the current cycle with a move below the crash lows and the $10,000 level after the stellar rally of the previous months. Key support is still found near $13,000, with further levels at $11,300, $10,000, $9000, and stronger levels at $8200 and $7700

BTC/USD, 4-Hour Chart Analysis

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Altcoins also settled down across the boards with only a few coins registering strong activity. Ethereum and NEO have been among the coins making headlines, as the second largest coin continued to grind, higher still trading near its recent all-time high today. The price of the ETH token is moving in a short-term uptrend, in the face of the stretched momentum indicators, but we expect a meaningful correction soon, and long-term investors should wait for a more favorable technical setup before entering new positions, with key support levels at $1000, $850, $740, $625, and near $575.

ETH/USD, 4-Hour Chart Analysis

Ripple remained under heavy selling pressure in the meanwhile, as the oversold bounce of the weekend faded away and the coin got close last week’s lows again. As the short-term downtrend is intact, traders should stay away from entering new positions, while investors should wait for short-term sell-offs towards the main support levels at $1.50, $1.25, and $0.85 to add to their holdings.

XRP/USDT, 4-Hour Chart Analysis

(more…)

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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Analysis

Technical Analysis: Coins Rebound as Key Support Level Holds Bitcoin

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The $13,000 level in the price of Bitcoin continued to be the center attention of traders today, as the most valuable coin successfully tested the crucial support zone overnight, despite another brief dip below it. The other majors followed the subsequent bounce higher, with Ethereum pushing past $1250 once again, while Ripple reclaiming the $2 level.

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Despite the bounce, the short-term trend in Bitcoin is clearly bearish and the correction is still likely to continue, although the extreme long-term overbought readings are now cleared. We still expect a move towards the previous correction low near $11,300, with a likely dip below $10,000 before the end of the current cycle, with further important support levels are found at $9000, $8200, and $7700.

BTC/USD, 4-Hour Chart Analysis

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Ripple recovered slightly after nearing the $1.50 level and reaching short-term oversold readings, and the coin tested the primary resistance level at $2.1 yesterday in late trading. The currency remains in a strong short-term downtrend despite the bounce and the continuation of the correction is likely, although long-term investors could already accumulate new positions near the main support levels at  $1.50, $1.25, and $0.85.

XRP/USDT, 4-Hour Chart Analysis

Ethereum bounced of the dominant short-term trendline, but the coin remains overbought on all time-frames and we expect a trendline break in the coming days. That said, traders could hold smaller positions here with tight stops as a push towards the prior all-time high is still possible. Key support levels are found at $1000, $850, $740, $625, and near $575.

ETH/USD, 4-Hour Chart Analysis

(more…)

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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6 votes, average: 4.17 out of 56 votes, average: 4.17 out of 56 votes, average: 4.17 out of 56 votes, average: 4.17 out of 56 votes, average: 4.17 out of 5 (6 votes, average: 4.17 out of 5)
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Analysis

Technical Analysis: Bitcoin Tests $13,000 as Hectic Correction Continues

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The cryptocurrency segment remained generally bearish in the middle of the week, as the Ripple and Bitcoin-led move spread to almost all of the majors, with even the recent leader Ethereum getting hit today.

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As BTC got smashed below the dominant rising trendline, a wave of selling pushed the coin under the key $13,000 level before a violent bounce started. Despite the bounce, the long-term picture remains negative, and we still expect a test of the correction low near $11,300 in the coming weeks, with a likely dip below $10,000 before the end of the current cycle. Further important support levels are found at $9000, $8200, and $7700.

BTC/USD, 4-Hour Chart Analysis

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Ripple got very close to the key support level at $1.50 today in early trading, and after the sell signal six days ago, the coin is nearing a neutral short-term signal in our trend model, and a more durable bounce is possible here. That said, the long-term picture remains bearish and further corrective price action is likely before the end of the current cycle. Despite the likely consolidation, long-term investors could already accumulate new positions on the short-term sell-offs near the main support levels at  $1.50, $1.25, and $0.85.

XRP/USDT, 4-Hour Chart Analysis

Ethereum’s rally topped out near $1350 for now, and given the now severely overbought long-term picture we expect the short-term trend to end in the coming days. With that in mind, although traders could still enter small positions near the trendline, correction risk is now high, and investors should wait for a deeper move lower before entering new positions. Key support levels below $1000 are still found at $850, $740, $625, and near $575.

ETH/USD, 4-Hour Chart Analysis

(more…)

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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13 votes, average: 4.08 out of 513 votes, average: 4.08 out of 513 votes, average: 4.08 out of 513 votes, average: 4.08 out of 513 votes, average: 4.08 out of 5 (13 votes, average: 4.08 out of 5)
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