If you’ree everywhere. It’s in the news, on TV and flooding our social feeds.
And why wouldn’t it be? Bitcoin is widely considered the king of cryptocurrencies, making up roughly half of the market cap of all crypto available worldwide.
The fact that few people truly understand how bitcoin works and what drives its value means it’s ripe for scammers and fraudsters.
In 2020, Bitcoin investment scams accounted for an eye-watering $328 million worth of losses from Australians alone – and they’re only the ones we know about.
Despite the fact that almost 1 in 5 Australians own some type of cryptocurrency, there’s no formal regulation of crypto trading in Australia, so it’s important to do your research before you commit.
“Anyone can accept bitcoin payments from anyone, anywhere in the world, anytime. This opens up amazing opportunities for investors, but it also means it’s fertile ground for scammers too,” says Adrian Prezlozny, CEO of Independent Reserve, one of Australia’s largest cryptocurrency exchanges.
“Like any financial product, it pays to take the time to protect yourself and your investment. The best way to do this is to know what to avoid and who to trust.
“The most important thing to remember is that just because bitcoin is a digital currency doesn’t guarantee you’ll get rich quick. There’s no such thing as free money – if the offer sounds too good to be true, it generally is,” he says.
Bitcoin can make you money, but you can also lose a lot if you’re not careful. Picture: Ozan KOSE / AFP
How to spot a bitcoin scam
There are many types of cryptocurrency scams – what to look out for and what to avoid.
• Ponzi or Pyramid schemes: Often sounds appealing because they will promise you a regular return on your investment. You might be told money is being generated by bitcoin trading activities, but in reality no real investment exists.
• Bitcoin flipping: Usually involves claims you’ll double your money overnight if you pay an initial start-up fee to exchange bitcoins for money. If it sounds too good to be true, it is.
• Large account release: After an initial investment, scam sites may show you a large balance that they have run up through ‘investing’ or ‘trading’ your deposit. They’ll then give reasons for you to deposit more money before they can ‘release’ your funds.
• Anydesk: A broker or advisor asking you to install a screen sharing software, particularly ‘Any Desk’ is almost certainly a scammer. There is no need for any genuine company to see your desktop screen. It’s usually a ploy to retrieve your account information.
• Blockchain scam: Don’t trust anyone claiming they have ‘found’ a large amount of cryptocurrency that belongs to you on the blockchain. They’ll usually ask for a ‘release fee’ to withdraw your funds, but you can guarantee they’ll run off with your cash.
• Recovery services: cryptocurrency transfers cannot be reversed. Any recovery service that asks for money up front is almost certainly a scam and should be avoided.
Protecting yourself and your investment
“The best way to protect yourself and your investment is to choose an established online trading platform you can trust,” says Adrian.
“A reputable exchange should be able to easily answer your questions about how they manage your trades and store your Bitcoin. It’s important to ask about things like security, data integrity, cold storage, fees, consumer protection and available coins.
“A crypto exchange with a solid track record that is trusted by many customers and has the right checks and balances in place is your safest bet,” he says.