8 Types of Bitcoin Scams

What is a Bitcoin Scam?

Bitcoin is the product of a blockchain project under the same moniker. Bitcoin is often regarded as one of the first digital forms of currency in the world. The project was created by an anonymous source identified as Satoshi Nakamoto. Nakamoto planned to replace the centralized monetary system with a decentralized one like Bitcoin that does not need any regulatory supervision and remains online 24/7.

Bitcoin is a novel technology that attracted the attention of tech experts and financial moguls around the globe. However, for 99% of the population, the idea of Bitcoin and its inner workings is relatively new. Therefore, scammers use the digital token to take advantage of the people who have limited knowledge about how cryptocurrencies like Bitcoin work. These financial schemes that trick people into giving up their cryptocurrency reserves forcefully or voluntarily are called Bitcoin scams.

History of Bitcoin Scams

Scammers are present in every industry and every walk of life. People have been trying to steal money, trick people, into giving up their assets, or looting them for financial gains since the beginning of time. Due to the high demand and market value of Bitcoin, many scammers try to steal it from investors using different means.

Satoshi Nakamoto first introduced Bitcoin in 2009 as an open-sourced and publically owned project. During its first years, Bitcoin remained largely popular among tech enthusiasts and many developers gathered Bitcoin by setting up mining machines as a hobby. Here are some examples of the earliest Bitcoin scams:

  • First-Ever Bitcoin Scam

The first-ever recorded incident of Bitcoin scams happened in June 2011. A Bitcoin miner named Allivan managed to collect around 25,000 Bitcoins by mining tokens as a hobby. At the time, the Bitcoin market value was only estimated at $20 per unit. Allivan reported later that the Bitcoin reserves on his Personal computer disappeared one day after a hack attack. It is worth noting that secure storing options like digital wallets were not readily available at the time.

  • Second Bitcoin Scam

The second earliest Bitcoin scam was recorded in August 2011. Scammers offered fake digital wallet services under disguise and stole their Bitcoin reserves. Scammers introduced their fake crypto custodial services under the name of MyBitcoin. When a considerable number of people joined the fake website, hackers took it offline claiming that they were attacked by a ransomware. However, cyber security analysis revealed later that the scammers got away with the Bitcoin reserves of their clients by accessing their private keys.

  • Third Bitcoin Scam

The third earliest Bitcoin scam happened in 2012. Bitcoin scammers introduced a Ponzi scheme that promised big returns to vulnerable people as high as 7% per week. The scammers kept luring new people into investing their money into the fake project while the old payables were paid via the new payments of the latest victims. The state regulators managed to implicate and indict the Ponzi scheme called Tendon Shavers after a year. The scammers managed to steal more than 265K Bitcoin worth $9.045 billion at its current market value.

Are All Cryptocurrencies Susceptible to Scams?

Bitcoin is the highest value cryptocurrency in the world with an estimated value of around $69K at its peak last year. Therefore, Bitcoin is often regarded as the flagship or the benchmark cryptocurrency. At present, there are more than 10 thousand cryptocurrency variants worldwide according to CoinMarketCap. Cryptocurrency and blockchain are a novel technology that many financial experts like Mark Cuban consider the next big thing after the invention of the internet.

Meanwhile, there are some politicians and financial regulators who claim that cryptocurrencies are subject to high risks, price volatility and facilitate illegal activities. History dictates that people are skeptical about all new inventions in the world. The government of the United States banned newspapers in 1919 citing the 18th Amendment. Likewise, the Ottoman Empire imposed an exodus on the print media during the reign of Sultan Murad III in 1587. 

It is interesting to learn that in the 20th Century, the Saudi government tried to impose a ban on all types of paper currencies under the influences of a few religious schools of thought. The scholars at the time warned people to stay away from using paper money citing it as a carrier of sinful interest and a medium of Satanic practice. These examples show that the underlying human psychology views just about every new technology as suspicious and dangerous.

There have been several unfortunate incidents where the scammers take advantage of the vulnerability of a computer program or the investors and steal their cryptocurrencies. However, many experts postulate that blockchain and cryptocurrency can transform the financial infrastructure much like the internet. Therefore, it is not justified to mark down all cryptocurrencies including Bitcoin as unsafe and susceptible to scams.

8 Common Types of Bitcoin Scams

It is not advisable to not explore the financial benefits that Bitcoin offers due to the fear of scammers. However, it is not a good idea to invest money everywhere without acquiring sufficient knowledge and conducting research. Here are 8 most common types of Bitcoin scams that will allow the readers to learn about scams work and read about the best ways to avoid them altogether:

With Phishing scammers send fake messages or crypto investment offers to their victims pretending to be a celebrity, an organization, or any other trustworthy source. Scammers launch mass phishing attacks using email addresses, mobile applications, and social media networks.

An investor should never send anyone any cryptocurrency in advance without performing their due diligence on the source. It is best to install verification extensions on your browser that show authentic websites from the ones that have been marked as suspicious. It is a great idea to read the reviews or sign a legally binding contract before sending anyone Bitcoin in advance.

  • Extortion and Blackmail

Scammers use their hacking skills to acquire sensitive data or any other personal information of their victims and blackmail them to pay with Bitcoin to keep the information private. There are many cases where the scammers use psychological tactics to fool their victims into sending them extortion crypto payments. It is best to confirm first whether a scammer really has your private information before agreeing to send them any Bitcoin. Many cybersecurity agencies offer consultancy services to tackle such matters efficiently like CipherBlade.com.

  • Fake Crypto Exchanges

Fake cryptocurrency exchanges are a common way for scammers to trick people into sending their Bitcoin reserves directly to threat actors. Before using any website, extension, or mobile application it is best to verify its developers’ background. Furthermore, investors should also lookout for the fake versions of an authentic crypto exchange. Many people fall prey to these fake crypto exchange apps while trying to download the application through unverified sources.

  • Social Engineering

Crypto scammers can use their communication skills to convince people into sending them their Bitcoin reserves under false pretense. Most scammers target older people to take advantage of their lack of technological knowledge. Scammers can contact their victims through a call center or try to approach them through social media applications.

In one case, scammers called an elderly couple from California and asked them to send Bitcoin immediately claiming that their son was injured and in hospital. The old couple did not take any time to check facts and ended up transferring their Bitcoin reserves through an Bitcoin ATM.

  • Ransomware

Ransomware is a type of computer virus that can breach a personal computer or a mobile phone and lock the important information of its owner. After the ransomware locks the victim’s information, the threat actors demand payment in the form of Bitcoin to issue a decrypt key that could release the locked information.

It is always a good idea to invest in a reliable anti-virus that prevents such ransomware from entering your PC. Hackers also instigate ransomware attacks through website pop-ups. Such attacks can be avoided with the use of browser security extensions and MDDs (Mobile Dynamic Defense).

  • Fraudulent Crypto Schemes

Bitcoin scammers have adopted the traditional Ponzi and Pyramid Scheme model in the cryptocurrency sector. Investors can identify both scams by understanding their structure. A Pyramid scheme tries to recruit new victims continuously and divide the payments from its victims throughout the scam enterprise. The scammers usually place themselves at the top and get the biggest share of the money from their victims.

Meanwhile, a Ponzi scheme lures victims by promising unrealistically high returns. The scammers in this case typically do not have any type of investment plan and keep stealing the money from their victims. Ponzi scammers also use small fractions from new victims to pay off some of the money to their older victims. In both cases, scammers continue to fool their victims into sending them as much cryptocurrency as possible.

Every investment vehicle requires legal verification from a Federal authority. Instead of trusting a random stranger, the investors should ask for legal certifications, reviews, and qualifications. Many scammers were able to fool people by creating a fraudulent social media persona where they are portrayed as rich and successful entrepreneurs to fool their victims and avoid sharing any real credentials about their services.

  • Malware/Virus

Hackers use copy-paste malware or computer virus to trace specified information like a digital currency wallet address from their victims. When the victim tries to make a cryptocurrency transaction, the virus replaces the designated address with the digital currency wallet address of the scammers. As a result, the amount is unwittingly sent to the hackers.

A malware is downloaded on the system or the phone of the target without their knowledge. Malware cannot enter into a computer or a mobile phone that contains a reliable cybersecurity software or anti-virus.

  • Fraudulent Custodial Services

Cryptocurrency users prefer to have a safe place to keep their Bitcoin reserves away from the reach of scammers and hackers. Some scammers take advantage of this opportunity and sell spiked custodial services to the victims. Last year, a group of scammers sent cryptocurrency owners a fake hardware wallet under the guise of Ledger Company products.

A hardware wallet is like a USB drive that allows investors to place their cryptocurrency reserves in cold storage and offline. Ledger scammers stole the private keys of the cryptocurrency investors through their fake hardware wallets that were spiked with malware. It is crucial to never insert the private key into any unverified source. Furthermore, it is not ideal to use software or hardware custodial services without verifying their manufacturers and developers.

How to Respond When Scammers have already Stolen your Bitcoin?

It is a fact that the best way to prevent a Bitcoin scam is to avoid it altogether. Once the scammers manage to get to Bitcoin reserve, they can quickly transfer it online from one place to another. Nevertheless, it is still possible to address the situation without losing hope. Here are some tips to follow when scammers have already taken your Bitcoin:

  • Recover Your Transaction ID or TXID

Every cryptocurrency transactions generate a unique code that is known as Transaction ID or TXID. The investigators can use this code to trace your stolen cryptocurrency even after it has been moved by scammers. The TXID on the Bitcoin blockchain is a 65 digital hexadecimal code that contains numbers and letters. If you are worried that your Bitcoin has been sent to the scammers, you need to note down the TXID of the fraudulent transaction and share it with investigators ASAP.

  • First Incident Report

It is understandable for a person to feel the anxiety and stress of losing their Bitcoin. However, the panic of the victim can help the scammers get away with their crimes more effectively. Therefore, it is best to keep a cool head and try to calm the nerves after scammers have stolen your Bitcoin. Try to recall all the details of the scam in detail and write it down.

This type of first incident report that contains detailed and precise information about the scam can help the legal authorities to narrow down their search very quickly by comparing their records. The sooner the investigators can identify the scammers, the chances of the Bitcoin recovery increase likewise. Therefore, this type of report can accelerate the probability of recovery of your stolen crypto funds by many folds.

  • Contact Cybersecurity Consultants

Since cryptocurrency scams are becoming more commonplace among the masses with the increasing number of interest in digital currencies. Many cyber security companies offer their services to digital investors who are trying to deal with hackers or scammers that have stolen their Bitcoin reserves. Vents Magazine provides a list of the top 5 Bitcoin recovery consultants that can track down hackers and remove malware from the system of the victim and allow them to recover their stolen funds.

  • Report to Authorities

The Financial and Technical federal authorities are trying to improve their cyber-crime defense and detection abilities. Several government organizations offer their assistance to the users and encourage people to report any Bitcoin-related scams, attempts, or suspicious activities in the lieu of public benefit. If your Bitcoin is under the hold of scammers, you can contact the following financial regulators:

  • Federal Trade Commission or FTC website.
  • Commodity Futures Trading Commission or CFTC website.
  • US Securities and Exchange Commission website.
  • Internet Crime and Complaint Center or IC3 website.
  • Europol website (for the residents of Europe only).
  • Contact Your Customer Service

Most people make cryptocurrency transactions using a third-party application or website like a cryptocurrency exchange, a custodial wallet services provider, or a mobile application. The developers of these platforms constantly work on improving the security protocol of their programs. The report of a Bitcoin scam can allow the developers to recover the funds or freeze the account of the scammers to prevent them from getting away with your stolen tokens.

  • Spreading Awareness About Bitcoin Scams

The most commonplace cause of all crypto-related and financial scams is the lack of awareness among the users. Scammers do not depend on their computer or hacking skills alone to get away with the stolen funds. In most cases, the scammers need to get approval from their victim to enter into their system and acquire the private key and steal their funds.

Most people are scammed because they do not conduct proper research or lack knowledge about new types of scams like fake IPOs and fraudulent giveaway schemes. Many victims do not prefer to come forward and share their stories due to the fear of being ridiculed and facing embarrassment. However, if a victim chooses to stay silent they are consequently empowering the scammers to keep committing more crimes and amass more wealth through scams.


Bitcoin is a disruptive technology that offers a lot of great financial upgrades and advantages to people. However, Bitcoin scams are becoming more common due to the lack of awareness among the people about the inner workings of the blockchain networks. By reading about different types of Bitcoin scams, every digital investor can develop the aptitude to avoid such unfortunate incidents. It is crucial to learn more about the precautionary measures for every different type of Bitcoin scams. By sharing the information about these crypto scams in your social circle and with government authorities, every digital investor can contribute to making the industry more secure against such threats.