How to Spot a Crypto Scam

You’ve seen it before: A site that promises instant returns on your small crypto investment.

It looks legitimate with all the happy customer testimonials, FOMO-inducing promises and easy-to-use dashboards that look like so many other financial sites. The language is open, breezy but sometimes, well, odd.

One site, Coindeskminers.com especially piqued our interest because it used a derivative of our brand without our knowledge, much less consent.

“They say money doesn’t grow from the ground, well it does with crypto currencies [sic] because at Coindesk Miners we have assembled a group of world-class engineering, strategic cryptocurrency mining and investment logic growing investments and making profits for both parties,” the website says. The promise is simple: You submit a little cryptocurrency, as little as $5, and you’ll get instant returns. And it implies a nonexistent connection to CoinDesk, the world’s premiere crypto news site.

Too bad it’s all a scam.

And, sadly, not everyone can tell.

In the past few months, CoinDesk has received multiple messages from users – including some retirees – who have dumped thousands of dollars worth of crypto into these sites. Further, Reddit is full of examples of savvy users being duped by get-rich-quick schemes. The site we’re exploring today, Coindeskminers.com – we aren’t linking to it but we want you to be aware of the name – is just one of many we’ve seen over the years.

The trick often runs like an advance fee scam – think the Nigerian prince who wants to give you millions but needs a few thousand dollars to complete the paperwork – with a sad twist.

Because cryptocurrencies cannot be returned (unless the recipient chooses to) and your bank can’t step in to prevent a transaction, the scam begins with you losing your “investment” instantly. Any money you send to this site is gone. Then, after the scammers show you the amazing profits you’ve made on your money, they ask for more money to pay for “fees,” essentially forcing you to pay up in the hopes of gaining your cash and fake profits back. Then the scammers disappear.

Let’s explore the world of scam sites and talk about what you can do to stay safe.

When in doubt, reach out

The first step before using any crypto site is to reach out to a knowledgable third party. This could include posting on a Reddit cryptocurrency forum (where you’ll be yelled at) or asking a computer-savvy friend about the site. Further, if you have any questions, feel free to reach out anyone at CoinDesk regarding crypto and crypto scams.

In this case, a reader notified us about Coindeskminers in a quick email to our news@coindesk.com email address. This is always a good first step. The reader, who preferred to remain anonymous, wrote:

Coindeskminers was familiar to us. We noticed this scam back in December 2019 and warned our readers in a tweet. Unfortunately, that wasn’t enough.

We began checking things out. The first step? A visit to the site itself. This brings up a professional-looking page complete with screenshots, logos, testimonials and login system. And a bastardization of our logo.

We performed a bit of analysis using a tool called a WhoIs lookup and discovered the owners registered the domain name anonymously but originated in Nigeria, a place unfortunately known as a scammer hotbed. That said, we’ve seen scammers pop up all over the world and, thanks to the decentralized nature of cryptocurrencies, physical location no longer matters.

Further analysis of the host turned up very little. Because servers can be anywhere in the world, this one appeared to be in California and the use of Cloudflare – a service that ensures website accessibility – further clouded the user’s location. In short, a dead end.

We then decided to check out some of the images on the site.

The easiest way to tell if a site is legitimate is through a reverse image search. We picked a few images from the site and looked for its original sources using images.google.com. Images purporting to be “the team in action” or official office buildings are often stolen from other websites. For example:

This particular image – obviously photoshopped – first appeared on Twitter in November 2019, a month before we noticed this site. It shows a seminar in Singapore and the scammers have sloppily added bold signage to the picture. This is a major red flag.

Another picture purported to show the team working on their product.

This photo is also stolen from Twitter. As you can see, the screens and the images have been clumsily edited.

Finally, we scrolled down to the testimonials. What we found surprised us.

That’s right: Harvey Weinstein, disgraced film producer, is apparently a customer of this site but goes under the name of “Henry alamin [sic]”. At this point, it’s abundantly clear that this isn’t a real business. A quick chat with the admin clinched it for us.

And thus we can definitely state this is a scam.

Regrettably, not everyone goes into these situations with their guard up. In the always-on chat window on each of these sites, there are customer service reps who offer 4% on a 24-hour deposit of $100 or more or 10% after “65 minutes.”

What happens in this case is your online balance is updated to reflect your “profits” and, in the end, it becomes impossible to withdraw what you’re owed. In another example of this scam, a retired man we spoke with described submitting over $10,000 to a mining site like this one and then being harangued on Instagram by the site’s administrators. He lost his entire “investment.”

One Reddit user noted these scams often prey on newbies by associating themselves with organizations or people with nerd credit like Elon Musk, Linus Torvalds and, sadly, CoinDesk.

“Youtube has been inundated with these lately,” wrote Reddit user Pythagorean0503. “Blows my mind that YouTube can immediately police unfriendly comments about various SJW [social justice warrior] topics but have absolutely no idea that these bitcoin scams are being propagated through the algorithm. I saw one for Linus Torvalds and one for Elon Musk lately but luckily did not try to send any money.”

Image is everything

These sites prey on victims who believe cryptocurrencies are a get-rich-quick scheme. Given the countless stories posted about “bitcoin millionaires,” it’s easy to see why a site like this one, a site that strives for an amateur’s vision of legitimacy, could draw someone’s attention.

Unfortunately, there are no legitimate get-rich-quick schemes in crypto or in any other corner of the financial world. There are only scams. The ability to turn $100 into $104 in 24 hours, as these sites are claiming, is impossible without running a standard Ponzi scheme and, thanks to the fungibility of bitcoin, most scammers don’t have to bother with complex grifts. Instead, they walk a user through the process of buying and sending bitcoin using a service like Coinbase and then abandon them when the trade goes through.

Just because a site looks legitimate doesn’t mean it is. Many scams masquerade as legitimate groups or people – as in Coindeskminers – or attach themselves to conversations in Instagram posts offering free bitcoin. Scammers take advantage of users who frequent non-financial social networks like Instagram and Twitter and avoid legitimate forums and message boards. Ultimately, they exploit human greed and naivete.

Whack-a-mole

After a bit of digging, we spotted something quite interesting. Coindeskminers is just one of many sites using the same design and layout. One, bitcoremine.com, is a nearly exact copy of Coindeskminers without Harvey Weinstein.

A quick search for the unusually named user “Hilda Balduin Bitcoin Magazine” brought up multiple sites including tradecoinex.com and enbridgetrades.com. All of these have a similar design and a similar back-end interface where you submit your crypto. In this case, the scammers request bitcoin to be sent to the address ’12b6fGaJNyKmuXgDn9i5sQp9iNhob2H9U5‘, which has received $7,777.58 worth from other crypto users – in this case, victims.

What can you do?

If you already sent money to a bitcoin wallet, it is probably gone. Scammers can easily withdraw funds by buying and selling cryptocurrency locally in face-to-face transactions. If you notify your wallet provider – Coinbase, say – sometimes it can attempt to stop the transfers but this rarely, if ever, works.

An ounce of prevention, as they say, is worth a few thousand dollars in scammed bitcoin. Be wary of any site that offers instant profits and amazing interest.

Anyone saying you can get rich quick is only talking about themselves.