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Is the Bitcoin Revolution a scam?
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It’s not a real thing— every company that has tried to implement blockchain has found it unsuitable for their purposes.
Sierra Leone did not actually have a blockchain-powered election.
Bitcoin is accepted by fewer meaningful vendors than it has in years.
Sadly, it won’t ever go away entirely, but it can easily occupy that same spot of cultural consciousness QR codes do, where ‘huh, that is kinda novel but I never bother with it’ sits as the fate of the LAST technological innovation everyone swore would revolutionize supply chains.
Does something such as Bitcoin Bank exist that pays monthly interest?
Тему создал/а Brushless4500KV, November 11, 2020 in Bitcoin
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Nigerian Bitcoin Scam Disappears With Victims’ Funds
More than 1000 investors stormed the offices of a bitcoin trading company in Calabar, Nigeria last week only to discover that the proprietors had disappeared with their money. The company, which was offering 30 percent interest after a week of trading, stole millions of Naira after about two months of operations.
A customer who had invested ₦5 million said:
“I saw people collecting 30 percent interest after one week that is why I also put in money. A huge part of the money I put in was even borrowed”.
Members of the National Youth Service Corps (NYSC) also reportedly invested their money in the company. One of the members said she invested ₦1.5 million which was her life’s savings while another stated: “That money was all [I had saved during my service year]. This is painful, I thought I could do business and help myself and my poor family.”
The frustrated victims, realising that their investments were irrecoverable, took whatever items they could find in the company’s offices at the Bassey Duke shopping mall hoping to compensate themselves. Furthermore, the angry crowd caused such a ruckus that law enforcement officers were forced to fire warning shots in the air to control the situation.
“The crowd you are seeing today are just a few that have come to get their money. They made millions and disappeared with our money. I don’t know why we would never learn. MMM and the likes that promise quick profit have duped us in the past, yet we keep falling for them, including me. I put in ₦500, 000 into this one and now see my money has gone down the drain,” one of the victims said.
In light of the collapse of bitcoin pyramid scheme MMM in both Nigeria and Kenya, it is surprising that these type of bitcoin scams are still able to attract and finally harm “investors”. It is, therefore, important to highlight that you should never invest cryptocurrency in “investment schemes” that promise high returns in a short period of time as they are guaranteed to be scams.
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How Often Is Crypto Really Used In Illegal Activity?
Statistics, examples, and ways to legally use cryptocurrency
October 1, 2020, was a turbulent day for San Francisco Public Library. A dozen FBI agents pretending to be usual visitors surrounded a man sitting at one of the tables, took his laptop and put a pair of handcuffs on his hands. That man was Ross Ulbricht, founder of Silk Road – the largest darknet marketplace for drug dealers, killers, and other criminals. The seizure of Ulbricht was supposed to tackle the illegal online trade, but, as the news site DeepDotWeb wrote , the bust was “the best advertising the darknet markets could have hoped for”. The reputation of cryptocurrency also suffers from associations with terrorists, who sometimes use it for their needs. How big is the real scale of the problem? And how many legal ways to use crypto exist? ChangeNOW has dived into the topic – and suggests you an overview of the current state of the problem.
- The drugs trade volume using cryptocurrency is relatively large
- Crypto was a significant reason why a part of drug sales migrated to the web, though stays yet not viable and anonymous enough for dealers (same as for terrorists)
- As efficient use of blockchain technology requires good infrastructure, crypto remains not suitable enough for many terrorist groups
- However, some terrorists are trying to adjust to anonymity threats and hold fundraising in crypto
- Legal ways to use cryptocurrency include dozens and vary from IT services to car rentals
Crypto & Drugs & Rock’n’Roll
The total volume of the online drug market using cryptocurrency is around $1 billion. It is located in the darknet, which provides an attractive, profitable, and mostly secure environment for drug dealers. Cryptocurrency, in turn, allows making payments that are hard to be tracked by authorities. This is how blockchain technology has helped to bring a big part of drug sales online from the streets. And it’s not only about drugs themselves – many legal opioid drugs are illegally sold here, too.
However, cryptocurrency is not always as secure and anonymous as it is thought to be. The information about any transaction ever made stays forever in the blockchain, which makes the system way more transparent than cash payments. This is a significant limitation for using crypto in illegal purposes.
According to the University of Technology Sydney, about 46% of criminal activity of each year is connected to Bitcoin. As for the drug sale itself, trade volumes in crypto keep rising, but the percent of Bitcoin drug transactions out of all transactions goes down. This means Bitcoin is more frequently used for legitimate purposes.
What cryptocurrency is used for drug sales most often? Surprisingly, privacy coins such as Monero are used only for 4% of transactions. Due to its pioneer position, Bitcoin is used in 76% of all deals despite all its anonymity risks.
The main problem for drug dealers using crypto is to turn their income into cash. This move remains complicated and insecure. Most cryptocurrency exchanges have instruments to define whether a transaction is coming from a suspicious source like the darknet. The rise of Monero use in the online drug market will hinder such tracking. However, for the reasons listed above, crypto is unlikely to completely replace regular cash in drug sales in the foreseeable future.
The views on how much cryptocurrency is used and will be used by terrorists vary widely. While some claim that terrorists have no infrastructure to use it and the methods are not secure enough, others argue that they are learning fast and adjust to crypto rapidly. Let’s see what both sides say.
Not actively using, unclear future
Lack of appropriate infrastructure, inability to use crypto. Most terrorist groups settle in the Middle East region, especially on its remote and war-torn territories. The vast majority of roads and technological infrastructure have been destroyed. In such circumstances, cash remains the most common and convenient way to pay and fundraise. Imagine a gun seller in a Syrian village – does it look like he has a tool to accept Monero?
Anonymity threats. Given the relative transparency of blockchain mentioned above, crypto might remain too unsafe for terrorists. Miners can see any potential terrorist money exchange while checking transactions, and it’s not too hard to see who sends them money. It can change with the rising use rate of privacy coins, but the ability to spend such money remains questionable.
Increased attention to crypto by the authorities. As the number of transactions keeps rising, more regulatory bodies’ attention gets focused on cryptocurrency, which apparently makes terrorists nervous and cautious.
Problems of specific currencies. While top cryptocurrencies like Bitcoin receive much regulatory attention, others remain marginal and unreliable because of a lack of support. Conflicts and uncertainty lower the trust to such cryptocurrencies – yes, even terrorists’ trust.
Using actively now, increasingly in the future
Terrorists seem to be rapidly learning to escape from tracking in blockchain. Several years ago it was easy to find any address or transaction made for a terrorists’ fundraiser. Today they use well organized and finely designed websites, where detailed video tutorials show how to donate money anonymously. Unique Bitcoin addresses and other crypto tricks are used to preserve security. Analysts from intelligence services claim there’s only going to be more such cases. And, of course, privacy coins are a “great opportunity” for terrorists too.
Shift to cryptocurrency is a reaction to economic sanctions. ISIS has lost most of its territory and resources, Hamas has been sanctioned by the West. Having been cut off from all main financial institutes, terrorist groups had to find other pathways for their financial activities – and cryptocurrency appeared to be the best substitute.
There might be difficulties and inconveniences, and the number of terrorists using crypto is yet unknown – but as we can see, digital money in terrorism is reality. Same as in drugs. And this is what cryptocurrency is notorious for, lacking trust among millions of people. The reputation of some of the exchange services only adds to this mistrust – ChangeNOW has carried out a special investigation on how such platforms may cheat their clients . But can you buy anything besides heroin and firearms with your crypto? What about pizza or a concert ticket?
Only Antarctica left
Cryptwerk , a platform monitoring actual use cases of different cryptocurrencies, says there are about 3500 ways to spend Bitcoin and more than 800 for Monero today. They range from music services to car rentals, from buying clothes to hotel booking services, and from sports bets to virtual tours.
Organizations accepting cryptocurrency are located on all continents besides Antarctica (what could be a better place for crypto than a continent without governments and countries though?). Mostly, in the USA and Central Europe. Bitcoin as the largest cryptocurrency is relatively widespread in India and Southeast Asia.
As this is a whole another topic, ChangeNOW will issue a post dedicated to use cases of cryptocurrencies. As it will be more detailed, who knows – maybe you’ll find a pizza right by that you could pay for from your crypto wallet!
This article was contributed by Jeremy from ChangeNow.
Pay Attention to These 7 Bitcoin Scams
Bitcoin – the possible Pandora’s Box of the currency world – has never been short of controversy. Whether it be aiding the black market or scamming users out of millions, bitcoin is no stranger to the front page.
Still, the jury is out on the legality and usefulness of bitcoin – leaving it in a proverbial grey area. Bitcoin’s price has fluctuated throughout its history, falling and rising, currently hovering near $10,000. Perhaps you’ve found bitcoin while it looks to be on the rebound and find yourself interested in it as an investment.
However, there have been several legitimate bitcoin scams that have become infamous, and you need to know about them – but, what are the top 7 bitcoin scams? And how can you avoid them?
What Is a Bitcoin Scam?
For most cases, it may be pretty obvious what a scam is – but with bitcoin, and cryptocurrency in general, things become murkier. Bitcoin itself is an unregulated form of currency that essentially is a mere number that is only given value because of an agreement. It’s basically like a moneybag with a lock on it – the code of which is given to the recipient of the bitcoin (an analogy drawn by Forbes in 2020).
Bitcoin scams have been famously criminal and public in nature. With no bank as a middleman in exchange, things become more complicated; so hackers and con men have had a heyday.
Top 7 Bitcoin Scams
There have been (and undoubtedly will be) nearly countless bitcoin scams, but these frauds make the list of the top 7 worst bitcoin scams to date. Take note.
1. Malware Scams
Malware has long been the hallmark of many online scams. But with cryptocurrency, it poses an increased threat given the nature of the currency in and of itself.
Recently, a tech support site called Bleeping Computer issued a warning about cryptocurrency-targeting malware in hopes of saving customers from sending cryptocoins via transactions, reported Yahoo Finance.
“This type of malware, called CryptoCurrency Clipboard Hijackers, works by monitoring the Windows clipboard for cryptocurrency addresses, and if one is detected, will swap it out with an address that they control,” wrote Lawrence Abrahams, computer forensics and creator of Bleeping Computer.
The malware, CryptoCurrency Clipboard Hijackers (which reportedly manages 2.3 million bitcoin addresses) switches addresses used to transfer cryptocoin with ones the malware controls – thus transferring the coins to the scammers instead. And, according to Asia Times, even MacOS malware has been connected to malware scams involving cryptocurrency investors using trusted sites like Slack and Discord chats – coined “OSX.Dummy.”
2. Fake Bitcoin Exchanges – BitKRX
Surely one of the easiest ways to scam investors is to pose as an affiliate branch of a respectable and legitimate organization. Well, that’s exactly what scammers in the bitcoin field are doing.
South Korean scam BitKRX presented itself as a place to exchange and trade bitcoin, but was ultimately fraudulent. The fake exchange took on part of the name of the real Korean Exchange (KRX), and scammed people out of their money by posing as a respectable and legitimate cryptocurrency exchange.
BitKRX claimed to be a branch of the KRX, a creation of KOSDAQ, South Korean Futures Exchange, and South Korean Stock Exchange, according to Coin Telegraph.
BitKRX used this faux-affiliation to ensnare people to use their system. The scam was exposed in 2020.
3. Ponzi Scheme – MiningMax
“Ponzi bitcoin scam” has got to be the worst combination of words imaginable for financial gurus. And, the reality is just as bad.
Several organizations have scammed people out of millions with Ponzi schemes using bitcoins, including South Korean website MiningMax. The site, which was not registered with the U.S. Securities and Exchange Commission, promised to provide investors with daily ROI’s in exchange for an original investment and commission from getting others to invest (basically, a Ponzi scheme). Apparently, the site was asking people to invest $3,200 for daily ROI’s over two years, and a $200 referral commission for every personally recruited investor, reports claim.
MiningMax’s domain was privately registered in mid-2020, and had a binary compensation structure. The fraudulent crypto-currency scam was reported by affiliates, resulting in 14 arrests in Korea in December of 2020.
Korea has long been a leader in technological developments – bitcoin is no exception. However, after recent controversy, it seems as though this is changing.
“But a lot of governments are looking at this very carefully,” Yoo Byung-joon, business administration professor at Seoul National University and co-author of the 2020 research paper “Is Bitcoin a Viable E-Business?: Empirical Analysis of the Digital Currency’s Speculative Nature,” told South China Morning Post in January. “Some are even considering putting their currencies on the blockchain system. The biggest challenge facing bitcoin now is the potential for misuse, but that’s true of any new technology.”
4. Fake Bitcoin Scam – My Big Coin
A classic (but no less dubious) scam involving bitcoin and cryptocurrency is simply, well, fake currency. One such arbiter of this faux bitcoin was My Big Coin. Essentially, the site sold fake bitcoin. Plain and simple.
In early 2020, My Big Coin, a cryptocurrency scam that lured investors into sinking an alleged $6 million, was sued by the U.S. Commodity Futures Trading Commission, according to a CFTC case filed in late January.
The CFTC case further details that the suit was due to “commodity fraud and misappropriation related to the ongoing solicitation of customers for a virtual currency known as My Big Coin (MBC),” further charging the scam with “misappropriating over $6 million from customers by, among other things, transferring customer funds into personal bank accounts, and using those funds for personal expenses and the purchase of luxury goods.”
Among other things, the site fraudulently claimed that the coin was being actively traded on several platforms, and even mislead investors by claiming it was also partnered with MasterCard, according to the CFTC case.
Those sued included Randall Carter, Mark Gillespie and the My Big Coin Pay, Inc.
5. ICO Scam – Bitcoin Savings and Trust and Centra Tech
Still other scammers have used ICO’s – initial coin offerings – to dupe users out of their money.
Along with the rise in blockchain-backed companies, fake ICOs became popular as a way to back these new companies. However, given the unregulated nature of bitcoin itself, the door has been wide open for fraud.
Most ICO frauds have taken place through getting investors to invest in or through fake ICO websites using faulty wallets, or by posing as real cryptocurrency-based companies.
Notably, $32 million Centra Tech garnered celebrity support (most famously from DJ Khaled), but was exposed for ICO fraud back in April of 2020, according to Fortune. The company was sued for misleading investors and lying about products, among other fraudulent activities.
The famous DJ wrote his support in a caption on Instagram back in 2020.
“I just received my titanium centra debit card. The Centra Card & Centra Wallet app is the ultimate winner in Cryptocurrency debit cards powered by CTR tokens!” Khaled wrote.
The U.S. Securities and Exchange Commission even issued a warning in 2020 about ICO scams and faux investment opportunities, brought on by a slew of celebrities who promoted certain ICOs (like Paris Hilton and Floyd Mayweather Jr. to name a few).
“Any celebrity or other individual who promotes a virtual token or coin that is a security must disclose the nature, scope, and amount of compensation received in exchange for the promotion,” the SEC wrote in an Investor Alert in 2020. “A failure to disclose this information is a violation of the anti-touting provisions of the federal securities laws.”
Another example is Bitcoin Savings and Trust, which was fined $40.7 million in 2020 by the SEC for creating fake investments and using a Ponzi scheme to scam investors. According to Coin Telegraph, Trenton Shavers, the organization’s leader, allegedly scammed investors into giving him 720,000 bitcoins promising a 7% weekly interest on investments – which he then used to pay back old investors and even fill his personal bank accounts.
6. Bitcoin Gold Scam – mybtgwallet.com
Nothing catches the eye of the naïve quite like the promise of gold – bitcoin gold, of course.
That is exactly what mybtgwallet.com did to unsuspecting bitcoin investors.
According to CNN, the bitcoin gold (BTG) wallet duped investors out of $3.2 million in 2020 by promising to allow them to claim their bitcoin gold. The website allegedly used links on a legitimate website (Bitcoin Gold) to get investors to share their private keys or seeds with the scam, as this old screenshot from the website shows.
Before the scam was done, the website managers (slash scammers) was able to get their hands on $107,000 worth of bitcoin gold, $72,000 of litecoin, $30,000 of ethereum, and $3 million of bitcoin, according to CNN.
Bitcoin Gold, the site’s wallet used in the scam, began investigating shortly after, but the site remains controversial. Still, firm released a warning to bitcoin investors.
“It’s worth reminding everyone that it will never be truly safe to enter your private key or mnemonic phrase for a pre-existing wallet into any online website,” Bitcoin Gold wrote. “When you want to sweep new coins from a pre-fork wallet address, best practice is the same as after other forks: Send your old coins to a new wallet first, before you expose the private keys of the original wallet. Following this basic rule of private key management greatly reduces your risk of theft.”
7. Pump and Dump Scam
While this type of scam is certainly not relegated to just bitcoin (thank you for the education, “The Wolf of Wall Street”), a pump-and-dump scam is especially dangerous in the internet space.
The basic idea is that investors hype up (or “pump up”) a certain bitcoin – that is usually an alternative coin that is very cheap but high risk – via investor’s websites, blogs, or even Reddit, according to The Daily Dot. Once the scammers pump up a certain bitcoin enough, skyrocketing its value, they cash out and “dump” their bitcoin onto the naïve investors who bought into the bitcoin thinking it was the next big thing.
Bittrex, a popular bitcoin exchange site, released a set of guidelines to avoid bitcoin pump-and-dump scams.
While “stackin’ penny stocks” may sound like an appealing way to earn an extra buck (thanks to its glamorization by Jordan Belfort), messing in bitcoin scams is nothing to smirk at.
How to Avoid Bitcoin Scams
With the inevitable rise of bitcoin in current and coming years, it is becoming increasingly important to understand and be on the lookout for bitcoin scams that could cost you thousands. As more people become interested in Bitcoin, more people are also likely to try and pull off a scam.
There is no one formula to avoiding being scammed, but reading up on the latest bitcoin red flags, keeping information private, and double checking sources before investing in anything are good standard procedures that may help save you from being duped. Cryptocurrency can be a confusing topic even for the experienced Bitcoin enthusiast, so the more you read up on the world of Bitcoin, the more prepared you can be. After all, knowledge is power.
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