6 Common Cryptocurrency Scams and How You Can Avoid Them

The rise in the popularity and value of Cryptocurrencies has attracted a lot of interest from individuals and corporations worldwide.

These currencies have created millionaires over the years, and have proven to be a lucrative venture for all who seek to invest in the future.

However, this rise in value and mainstream adoption has come with consequences.

While good-willing individuals seek to invest and possibly make profits and be part of shaping the future of money, some criminal elements are hell-bent on defrauding them of their investments.

Potential investors are deterred from investing in this growing industry, due to the steady increase in cases of people losing their Cryptocurrencies to fraudsters and thieves. Old investors, on the other hand, are shying away as well.

You don’t have to shy away from investing in your favourite Cryptocurrency for the fear of being defrauded, scammed or robbed of your Cryptos.

All you need to do is exercise caution, ask questions and do your due diligence.

We, at Nigeria Bitcoin Community are here to guide you all the way.

As requested by a majority of our readers, we have put together 6 common Cryptocurrency scams and how you can avoid them.

At the end of this review, you will be able to easily identify common scam tactics and techniques used by most Cryptocurrency scammers.

Identifying them at first glance will definitely save you a lot of money and time.

Here they are:

Cryptocurrency Scam 1 — Pyramid Schemes (Multi-Level Marketing)

The founding fathers of Multi-Level Marketing had great intentions in mind. They used this marketing technique to get their products and services in front of more buyers, thereby increasing sales and growing their companies.

However, seeing the effectiveness of this marketing technique, fraudsters have deployed it into their criminal activities as well.

Unlike legitimate companies that recruit affiliates to help market their products and pay them commissions from their successful sales, scam platforms recruit affiliates to sell bogus claims and lies to unsuspecting individuals.

A majority of these individuals fall for the lies, invest their monies and boom! There are gone. The fraudsters take a large portion for themselves and give out a meagre percentage to their accomplices (affiliates).

These kind of platforms are easy to spot, they prey on naïve individuals by offering them quick returns on their investment, and when they fall prey, they are faced with reality – refer to earn or wait forever for your money.

Here are a few tips to keep you safe from Pyramid Schemes (Ponzi platforms):

  • Always seek a platform’s ownership info before making any investing. Ask yourself questions like – is the CEO credible? Has he been involved with any previous scam platform? Is his personality questionable?

Most pyramid scheme owners are not new in the game, they have been involved with several scams in the past, and most times, their present scheme is just a rehash of the previously failed scheme.

An example can be found in the owners of Pyramid schemes like Bitclubadvantage, AWSmining, Bitworld Center, and FutureNet.

Furthermore, most Ponzi schemes do not divulge their ownership info; they keep them out of reach from investors. So people just come in and invest blindly, and when the cookie crumbles, no one can be held accountable.

The bottom line is – Ascertain the platform’s ownership/background information. Ask questions like — Who runs the platform? Where is it based (its operational headquarters), and when was it was launched?.

  • Check the platform’s legal status. Are they duly registered with the appropriate authorities to operate a financial platform? Can you sue them when things go wrong?
  • Check past user feedbacks on forums and blogs. What do previous investors in this platform have to say?
  • Do their products or services actually exist?

If a platform can answer the questions above correctly, then invest in it.

Cryptocurrency Scam 2 — Fake Cloud Mining Schemes

These are arguably the latest scam ventures in the Cryptocurrency eco-system. While there exist unique companies who offer legitimate mining services, their returns are not as enticing as those offered by the scam platforms, hence the reason why most people fall for the scams.

In this section, I will give you a brief explanation on what mining is about, while providing you with the tools needed to identify scam cloud mining service providers.

Mining is more of a mechanical process that makes more Cryptocurrencies available for exchange and trade.

People who mine Cryptocurrencies do so with dedicated computer systems, these systems are responsible for confirming Cryptocurrency transactions.

As more people adopt and use Cryptocurrencies, the transaction load becomes too much for a small computer, hence the need for larger computers.

These large computers are expensive to buy and run, they consume a lot of electricity and need dedicated storage places (Farms) with cooling systems amongst other technical tools to run on a daily basis.

Also Read: Beginner’s Guide to Bitcoin Mining

It is true that mining can be a bit profitable. However, when you remove the daily cost of mining (Electricty bills, cooling vents etc…) not much is left.

Not many individuals can afford mining cryptocurrencies, especially Bitcoin. However, rich individuals and large companies are capable of bearing the cost.

What an ordinary person can do is, rent their computers for your own mining (this is popularly called – buying a mining contract) your investments are used to cover your mining cost for specific durations while you make profits – if possible.

The amount you earn on a daily basis cannot be guaranteed, it fluctuates.

Most times it takes years to get your investment amount back (break even) and more years to make any tangible profits.

Identifying Scam Cloud Mining Service Providers

In recent time, certain fraudsters (Criminals, thieves, robbers) use “cloud mining” as a cover-up for their illegal activities.

They create websites and platforms offering cloud mining contracts. They offer users fixed daily earning and huge ROI’s.

And when these individuals invest, they are introduced to referral programs where they are to invite their friends to buy cloud mining contracts and earn commissions from their referrals investments.

A typical example of a cloud mining fraud is AWSmining. However, there exist a variety of other mining frauds but AWSmining has caught our attention lately.

The criminals behind this Pyramid scheme under the guise of a cloud mining service provider, have gone to great lengths in their bid to make everyone believe in their lie.

They visit mining farms to record videos – claiming the farms belong to them. Visit hotels to rent conference rooms — claiming the rented conference rooms are their operational headquarter etc…

They claim to offer cloud mining services that pay out fixed profits daily, while providing users with an opportunity to refer new investors and earn 10% of their investments amongst other Pyramidal bonuses.

Now, any smart investor will ask questions like “if they pay me 10% from the amount invested by my downline, how much of my downlines money will actually be used to cover the cost of their mining contract?” “how will the platform come about the other bonuses it pays me?

Then reality will dawn on you – “it is a Pyramid scam, taking monies from new investors to pay old investors while keeping the rest for themselves”

At the end, if you choose to throw caution to the wind and invest with them, you will either wait an eternity to get back your money or make quick money by inviting your family and friends to also invest in the scam.

Furthermore, when new investors come in short supply, the platform shuts down and the only winners will be the criminal admins and their few accomplices.

Sometimes companies like this such as the crashed Trade Coin Club deceive their investors by showing them the amount they earn daily in their dashboard. When investors eventually realize that they have been scammed is when they try to withdraw this money and never get paid.

Here are a few tips for identifying Scam Cloud Mining Service Providers like AWSmining:

  • Always seek their ownership info before making any investing. Ask yourself questions like – is the CEO credible, has he been involved with any previous scam platform?

Ascertain the platform’s ownership/background information. Who runs the platform, where it is based out of (its operational headquarters) and when it was launched etc…

  • Do their mining farms actually exist?
  • Who are the staffs in these mining farms? Has anyone visited the farms apart from the company’s admins?
  • Is the platform legal? Do they pay taxes? Can they be sued?
  • Check past user feedbacks on forums and blogs. What do previous investors in this platform have to say?
  • Check the platform’s traffic statistics on Alexa to know if citizen’s of the platform’s host nation are patronizing it. They say – charity begins at home.
  • If it is legit, it has to be patronized by citizens of its host nation.
  • How does the platform operate, are their activities accessible and transparent?

If a Cloud Mining Service Provider can answer the questions above correctly, then invest in it.

Other common scams include:

  • Scam 3 — Fake ICO’s (we will cover in subsequent posts)
  • Scam 4 — Fake exchanges (e.g Furcoin )
  • Scam 5 — Hardware wallet theft (we will cover subsequently)
  • Scam 6 — Pyramid schemes disguised as social media platforms

There is absolutely no point in being scared of investing in Cryptocurrencies, many people have been successful in this venture and you can be successful as well. Do your due diligence, ask questions when not clear, don’t fall for opportunities too good to be true.

We at Nigeriabitcoincommunity are here for you 24/7. You can reach us via

  • E-mail: [email protected]
  • Facebook: https://www.facebook.com/Nigeriabitcoincommunity
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Also read: SibAN scam alert to fight crypto scam in Nigeria 

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