How to Avoid Bitcoin Fraud
The electronic currency Bitcoin has been gaining popularity among investors and speculators alike. As a result, the attention has attracted fraudsters. Similar to other forms of globally traded currencies, consumers are vulnerable to fraud in the form of Ponzi schemes, or other schemes in which Bitcoin is used to facilitate fraudulent or fabricated investments and transactions. In order to avoid bitcoin fraud while investing it's important to know about Bitcoin and various schemes that could be involved with the currency.
Typically, bitcoin-fraud schemes promise high returns and might involve an unregistered offering or trading platform. Below is a list of several types of bitcoin fraud that have targeted investors.
Bitcoin wallets are used to store funds and transfer money between other bitcoin wallets. In instances of fraud, fake bitcoin wallets use the names of trusted companies, tricking users to download them. After a short period during which the user is able to execute transactions, the money is then transferred out of the wallet and into the scammers. To avoid using a fake bitcoin wallet, only use a trusted site.
Ponzi schemes run with bitcoin are typically attractive to investors because they offer high profits, encouraging users to re-invest for more payouts. When users ultimately want to withdraw their perceived profits, they learn of the scam when they are unable to access their funds.
Phishing scams, sent and conducted by email, have become popular in the Bitcoin community. These scams occur when users receive emails saying they have won bitcoin and include a link that looks similar to a trusted wallet’s login page. Once the user inputs their username and password, the scammers capture that information and take control of the account.
Three Things to Avoid Bitcoin Fraud
To avoid bitcoin fraud, investors should follow the same principles used to avoid securities fraud. Here are three points to serve as a reminder:
Follow Your Intuition: The higher the investment, the greater the risk. While any investment involves some form of risk, if something sounds too good to be true, then it most likely is. And do not invest more than you can afford to lose.
Do the Research: Research any Bitcoin company before doing business with them. Since audits are publicly available, review their records and look for transparency in their dealings to ensure you are working with a company you can trust.
Take Caution: Digital currencies, although not tangible, are the equivalent to cash. Just like cash, once it’s gone, it’s gone. If you’re questioning a company or an investment, online forums can provide some perspective on which companies are legitimate and credible.
About Bitcoin Currency
Bitcoin is a cryptocurrency and digital system that was released on open-source software in 2009 and rose to popularity shortly after. The system works with peer-to-peer transactions, with transactions verified by a network and distributed via another system called blockchain. Since bitcoin works without a central repository, it is widely accepted as the first decentralized digital currency.
Recently, Bitcoin has been at the center of securities and investment news for its rise in price and recent market correction. The digital currency was worth as much as $3,000 per coin in early June, after tripling in value for the year. Shortly after, it fell by 12 percent. As with securities on the stock market, Bitcoin can be bought and traded for other currencies, products and services.
Do You Think You’re Involved in a Bitcoin Scam?
If you invested with or lost money in bitcoin and believe that you have been the victim of bitcoin fraud, contact an experienced investment fraud attorney today.
Call an Investment Fraud Attorney Today
If you are looking for an attorney to review your rights and options, the securities lawyers at Dimond Kaplan & Rothstein, P.A. have recovered more than $100 million from banks and brokerages firms for their wrongful actions.