In the ten years since bitcoin has been launched, cryptocurrencies have continued to rise in popularity, attracting many entrepreneurs and investors. Unfortunately, the sector has also attracted its fair share of scammers who are out to dupe investors of their money through well-crafted investment opportunities that promise to generate exceptionally high returns.

In this article, you will be introduced to the top three crypto scams that you need to avoid in 2019.

Ponzi Schemes

Ponzi schemes – also referred to as pyramid schemes – work by bringing in investors to invest in the scheme to pay returns to earlier investors. Crypto Ponzi schemes have become popular over the years due to the pseudo-anonymity of bitcoin, which makes it easier for operators of such schemes to cash out with investor funds without a trace.

In a Ponzi scheme, early investors have to recruit new investors who then have to recruit more investors in order for early investors to get paid. It is a cycle that continues with no actual or real investment. Once the founders of such schemes finally hit their ‘target’, they collapse and investors are left to count their losses. Most digital currency Ponzi schemes operate as high yield investment plans (HYIPs) or multi-level marketing (MLMs) schemes.

With HYIPs such as Apexcoins, investors are promised high returns when they invest in a digital currency investment platform with no known knowledge of how their money will be invested but that guarantee high returns.

In MLMs, there is no tangible product that is sold and investors have to pay a certain membership depending on the available packages. Old members of such schemes have to recruit new members who, in turn, recruit additional members in order for them to get paid. An example of a crypto MLM scheme would be Dascoin, which has been exposed as an alleged cryptocurrency scam by several industry experts.

Fake Bitcoin Trading Software

For investors looking to trade in digital assets, there is a range of cryptocurrency investment services they can rely on to help them generate profits when trading in digital currencies.

Bitcoin trading software or bots are software programs that place buy and sell orders on your behalf to generate a trading profit. They operate on autopilot and follow a set of predetermined rules. With the increased interest from people who want to make money off bitcoin, there has also been an increase in the number of fake bitcoin trading software tools that investors can fall prey to.  

An example of a fake bitcoin trading software is Bitcoin Loophole. Like legitimate bitcoin trading software, individuals will be required to sign up and create accounts and then make an initial deposit before they can start trading. What makes Bitcoin Loophole and similar software fake is that they promise investors very high returns but do not detail how the software works to achieve this. In most cases, software like this is designed to steal investors’ money once they have deposited funds.

ICO Scams

If you are into cryptocurrencies, by now you must know what initial coin offerings (ICOs) are. ICOs are a type of funding mechanism used by blockchain startups to raise money through the sale of digital tokens. While the idea behind ICOs is perfect for most startups that need funding for their businesses, it has also become an avenue for scammers who are out to swindle unwitting investors.

Billions have been raised in ICOs since the ICO boom that started in earl 2017, which explains why scammers are using ICOs to defraud new cryptoasset investors who have little or no knowledge of how the industry works.

There have been a number of fake ICOs that have emerged over the years leaving investors with nothing after investing in their token sale. Ensure that you do your own research before investing in any ICO you come across to avoid falling for this common crypto scam.



This is guest post by Rachael Odhiambo of BitcoinAfrica.io.