Before investing in bitcoin or other cryptocurrency, read this cryptocurrency scam warning about digital currency dangers.

If you are planning on investing in cryptocurrency, then read this cryptocurrency scam warning first!

Learn what is a cryptocurrency scam before you spend your money.

You can make money quickly with cryptocurrency. But read this scam warning first before investing in cryptocurrency.First of all, I have taken the plunge into cryptocurrency, buying both Bitcoin and Ethereum. I bought $30 of Bitcoins and $10 of Ethereum earlier in the year. Not large dollar amounts by any definition.

I could say the reason I bought some cryptocurrency was to balance my investments based on Modern Portfolio Theory. (I have an MBA in finance.)

Many financial advisers and experts recommend diversified investment portfolios to maximize returns based on an investor’s risk tolerance. Some advisers recommend small riskier investments in precious metals, for example.

I bought some out of curiosity and chance that cryptocurrency may actually turn out to be good investment.

Would I do it again?

A qualified YES!

I will tell you why shortly.

What is a cryptocurrency scam

A cryptocurrency scam is any scheme or activity that deceives, tricks, cheats you out of your money in exchange for the promise of financial gains with cryptocurrency.

Typical cryptocurrency scams include:

  • Pyramid schemes
  • Pump and Dump
  • Initial Coin Offerings
  • Fake cryptocurrency coins
  • Dishonest exchanges

Cryptocurrency pyramid scheme

cryptocurrency pyramid schemesPyramid schemes, including Ponzi schemes, are increasing rapidly online, particularly in the make money online niche. Business opportunity promoters are recruiting members to join networks. New members are required to pay membership fees to invest in cryptocurrency. Also, members are incentivized financially to grow the network instead of making sales.

Early in 2017, OneCoin representatives were arrested, convicted, and sent to jail for running a cryptocurrency Ponzi scheme. They had grabbed $350 million from investors.

Pump and dump

Jordan Belfort, “the Wolf of Wall Street”, was convicted and jailed for running a securities pump and dump operation. The same sort of thing is going on with cryptocurrency. The Business Insider reports pumping and dumping is widespread within cryptocurrency exchanges.

As the Wolf did, cryptocurrency traders are buying cryptocurrency at low prices and then artificially manipulating the prices and promoting them to unsuspecting investors.

Initial Coin Offerings

Initial Coin Offerings (ICO) are the cryptocurrency market equivalent to the stock market Initial Public Offering (IPO) of stock.

initial coin offeringsAn ICO is a way to raise funds by issuing a new digital coin (cryptocurrency). The new digital coin is exchanged for either cash, bitcoin, or other digital coin. Even Paris Hilton and

Belfort himself, who served 22 months in prison for securities fraud and money laundering in 2000, said that ICOs were

a huge gigantic scam that’s going to blow up in so many people’s faces” and that “it’s far worse than anything I was ever doing.”

Celebrities like boxer Floyd Mayweather and Paris Hilton may be trouble with the SEC over the endorsement of ICOs. The SEC has also filed fraud charges against PlexCoin.

Fake cryptocurrency coins

If you have spent any time in the make money online niche or been looking for ways to make money online, then you may have seen social media ads or email ads promoting bitcoin, ICO, or cryptocurrency coin opportunities.

Scammers and unethical marketers are taking advantage of people by promoting fake coins or opportunities. The Swiss authorities recently closed down a fake coin operation and are investigating other possible fraud schemes.


Dishonest cryptocurrency exchanges

First of all, a cryptocurrency exchange is a digital marketplace where people can buy and sell cryptocurrency using different fiat currencies or altcoins.

Since the cryptocurrency market is so unregulated, it is difficult to determine the trust worthiness of any cryptocurrency exchange, particularly new ones. Mt. Gox was one of the largest cryptocurrency exchanges until they stopped trading coins in 2014. They lost 850,000 bitcoins over a period of time to thieves.

If you are looking for information about exchanges, then this guide may be of help to you.

Here is a very short list of cryptocurrency exchanges (the ones I have seen) that I would consider using:

  • Coinbase – I use this one only.
  • Kraken
  • Bittrex
  • CEX.IO

Here is why I may not invest more in cryptocurrency

1. Scams – There is not a way to evaluate offers being made. So many programs are overly hyped offering promises of riches without effort. Programs focus on recruiting new members instead of the sale of product or bitcoins.

2. Bubble – The cryptocurrency market is acting as if the pricing bubble is about to pop. Trading volatility and froth reflect pricing uncertainty and high risk due to speculative pricing. The cryptocurrency charts reflect the speculative nature of cryptocurrency pricing. The fact that celebrities are creating their own coins are fueling the frenzy.

3. Liquidity – It may be easy to buy cryptocurrency. Selling it not so much. Transaction fees per trade have tripled recently. And may go up again. Also, given the hug surge in trading volume, the cryptocurrency market infrastructure cannot keep up with demand. Coinbase acknowledged their computer systems were overwhelmed and need of update to handle the volume. Furthermore, the Electroneum mobile application shut down for a system update to improve security. This left its members without access to their cryptocurrency for a few weeks.

However, the U.S. based Chicago Mercantile Exchange is planning on launching bitcoin futures for trading on the CME. Bitcoin futures enable investors buy into the digital currency market without directly investing in the cryptocurrency.

If you must invest in cryptocurrencies…

Follow these cryptocurrency investment tips:

  • Invest in amounts you can afford to lose in it’s entirety.
  • Do your due diligence, homework.
  • Manage your expectations. Expect to lose it all.
  • Stay with the major exchanges and cryptocurrency.
  • Expect price volatility. The charts already show that. Price direction is not one way.

I appreciate any and all comments about cryptocurrency scams or your experience with cryptocurrencies. Please fill in and submit the form below.

25 Thoughts to “Cryptocurrency Scam Warning”

  1. Allana

    One wouldn’t really think much of this, all I really wanted to do was invest and be part of it but the way I was misled by this brokers was terrible, to easily take money from all in the name of investment and when I wanted to make withdrawals every single attempt was fruitless with constant hassle to invest more I really can’t say more than I have already said. I would really consider myself to be one of the very few lucky ones as I was able to have my funds recovered from this scam Binary option brokers, although it was through unethical means as far I am concerned but what can I care after how my hard-earned funds where taken from me, these guys are the best in less than 7days all my funds including bonuses had been recovered, If your broker lost your funds trading Binary options wealthrecovery94 at geemail
    dot com are more than able to get your funds back without any traces. Best of luck people.

    1. Glen

      Binary option programs are as prone to scams as are cryptocurrency ones. Years ago, I traded commodities including financials. I would not go anywhere near any binary option programs I’ve seen online.

  2. Simon Platten

    Be very very careful…I have been trading with coinbull for a few weeks and in that time some good profit has been made…however, the I then came under pressure to inject more funds into the account…I asked why? If I am making money from the initial investment why do I need to invest more? I then decided to test the site and tried to withdraw the funds from my account. At this point I discovered that I am not in control of the funds and that a representative from coinbull has to approve my withdrawal request. This is when the problems started and I warn anyone, don’t invest with coinbull, you are not in control of the funds. I was offered back my original investment but not the money I have made since trading. It is in my opinion a scam.

    1. Glen

      Thanks for sharing your experience, Simon. We all can learn from it. At this point seeing so many new “coins” and opportunities pop up, it is impossible to evaluate the risk involved. While people may have profits “on paper,” people really don’t know until they try converting the paper profits into currency of choice. I agree with your conclusion is if the company will only offer your original investment back, it is a scam.

  3. Rab

    I am personally not a big fan of cryptocurrency but I don’t think there is any harm if you invest in a little bit of money in bitcoin and see how it goes. Nowadays, everyone I know is jumping on the bandwagon but I tend to play safe and only invest in what has been historically proven – gold and precious metals. Nonetheless, I agree that it is a bubble and one big huge ponzi scheme so beware!

    1. Glen

      For MOST people, investing in precious metals should be small part of their investment portfolio. As to cryptocurrency, investing should be based on PRUDENCE. And, again, invest only what you can afford to lose.

  4. Guy Bouchard

    for all those caring about bitcoin: stay away from coinbull; they’re pure scammers; it’s been more than 10 workable days i try to get my money back; they play game on me arguing all kind of excuses and subterfugs to avoid proceeding with my withdrawal; they are only dishonest people and awful deceivers; don’t get trap as i did; guy bouchard, canada

    1. Glen

      Thanks for sharing your experience, Guy. Sorry to hear that you are having problems with CoinBull. There are several different websites for CoinBull. So it is difficult to determine specifically which one is causing problems. Coinbull.io has several negative reviews. So it is a fair assumption to say that it is coinbull.io, which claims to be a cryptocurrency trading platform. There is little information on the website to identify the owners or operators of coinbull.io. Definite warning flags for anyone considering investing with them.

    2. Guy Bouchard

      To update you all on my post about coinbull, it is after much arguying with them, even pressuring (and almost threatening them) that this morning (january 16th) i finally succeeded to get back my money; but how difficult it’s been; have had to argument with different people of this group to let them know i did not want to be part of their organization; they all tried to dissuade me not to do that, sometimes trying to make me feel bad, dump and stupid because i kept claiming my bright to leave; after much reading now on the topic of cryptocurrencies,, i profoundly prefer to stay away from it; and for sure do not listen or open your wallet to any improvised brokers; if they are not fully regulated (samething regarding forex), stay away; these people are only deceivers and pirates.

      1. Glen

        Thanks for updating, Guy. I agree about staying away.

    3. Helena

      Hi Guy,
      I am in the same situation, read reviews too late. May I ask you did you have yor money back or not, and if you did how did you manage it. They are asking my ID photo with me having in my hand, as well my credit card and I am not willing to give this . Thank you.
      Regads
      Helena

      1. ADRIAN

        Same bad experience here. They stole $275 from me, my mistake. Now when I want to close my account they ask me that photo etc. like in Helena’s case.
        They have a big number of employees (scammers) thay keep you hours on the phone then pester you with emails asking for photos under the pretense of ‘account verification’.
        When I asked the credit card bank to cancel the transaction they said they cannot deal with Coinbull because they are illegal !?!?!
        BEWARE! DON’T WALK AWAY, RUN !!!

        1. Glen

          Sorry to hear that, Adrian. They gave you the run-around with the idea that you would eventually get tired of trying to get a refund.

  5. Roy

    After reading your article I have made a decision. Was seriously thinking about investing in Bitcoin but will no do so no longer.
    The bubble has to burst. Impossible for it to keep climbing in the way that it has been doing. Don’t want to be around when it bursts and incinerates my hard-earned.

    1. Glen

      Thanks for sharing Roy. The current price volatility should be a warning to everyone. The marketplace is trying to find the “value” of bitcoin in particular. I decided to join a bitcoin mining pool as a way to participate in cryptocurrency without worrying about the daily price fluctuation.

  6. Chris

    with cyrptocurrency becoming so popular recently i have been looking into it to get as good of an understanding as i could before considering whether to invest. in doing this i came across a lot of people offering services or other things relating to bitcoin and it definitely felt a bit scammy.

    after reading this article i know what to look out for in terms of avoiding scams relating to cyrptocurrency and for that i am grateful.

    1. Glen

      Thanks, Chris. I appreciate you taking time to read and comment. I have been researching forums and Reddit to find more info about bitcoin scams. It is difficult to identify good places to invest. I will share the info once I have finished additional cryptocurrency research.

  7. Fred

    Didn’t know anything about cryptocurrency except just hearing about them every now and then. I thought it was all a scam even bitcoin. Thanks to what I’ve learned here I am probably going to be more cautious. Really good post, thanks

    1. Glen

      I appreciate you reading and commenting, Fred. Bitcoins are legit. Bitcoin futures started trading the other day on the Chicago Board Options Exchange. However, the U.S. Securities Exchange Commission put out a warning for investors in global cryptocurrency markets because of the potential for fraud and price manipulation.

  8. DorcasW

    Glen; your post carriers good quality information. What is happening now in Cyber Space you will agree that it is better to endure some form of lack and keep the little that you have than to invest the little for more in a scheme that is uncertain than unknowingly you have given your all in the hands of scammers, would not this mean that you have fallen into a state of having nothing in hands and nothing to collect? ,,, DorcasW

    1. Glen

      Thanks for taking the time to read and comment. Investing in cryptocurrency is certainly high risk and high reward considering other options. So it is all based on how much tolerance an investor has for risk.

  9. Mallory

    Thanks for the info! I have been looking into Bitcoin just because so many people have been talking about it lately. The fact that it has grown so quickly makes me nervous because in my eyes – what goes up, must come down. I think I am going to hold off on crypto currency for right now because of all the questions and ambiguity around it.

    1. Glen

      You are welcome, Mallory. I appreciate you taking the time to read and comment. Many people are talking about bitcoin and other cryptocurrencies reflects the herd mentality that Dr. Robert Cialdini (professor at Arizona State University) writes in his book, “Influence Science and Practice.” The principle of social proof states that people decide what to believe or do based on looking at what other people are believing and doing. 

  10. Crystal

    This is a huge thing all over the internet right now. There are so many scams on this particular topic. My husband and I use coin base only one we have used for months now. It is really nice to put in as much money as you would like and watch it grow on a daily basis. we put in money on all 3 coin base offers and so far are not doing bad with them. I recommend coin base also.

    1. Glen

      Hi Crystal. Thank you for commenting. My concern with the idea of digital currency is that it relies upon the cryptocurrency market to self-regulate itself. But should it fail, an investor has no recourse. China and South Korea have banned ICOs. And the U.S. Securities Exchange Commission is going after fraud. So I recommend everyone to be careful and do their homework as well as assess their tolerance for risk.

Leave a Comment