Blockchain And Cryptocurrency Provider

Common scams and how to spot them

Common scams and how to spot them
Table of Contents

Introduction

A couple of years ago we published an article outlining and explaining many of the online scams and how they were applied in relation to cryptocurrency. Until recently, due to measures and controls Boinnex put in place, we have thankfully encountered very few scams being attempted through our network of Bitcoin ATMs. Unfortunately, in recent weeks we have seen a marked increase in attempted scams. This is probably due to the rapid rise in value of Bitcoin and the crypto market as a whole as well as the growth of online connected social media and communication apps giving scammers in foreign jurisdictions an easy method of finding and contacting people around the world. This is not only related to the crypto market and has been very so frequent and caused such problems that Irish government bodies and banks have run new advertising campaigns to raise awareness on these issues. There have been many stories in both the RTE.ie website and papers such as The Irish Times highlighting and warning of the dangers.

As we explained in our previous article scams have been around for hundreds of years and are constantly being adapted and changed to suit new regulations and technologies. Subsequently, scammers have started to use crypto to transfer value from people as it has properties that make it ideal for this; namely, it is decentralised, immutable and practically speaking anonymous. This means unlike something like in a bank account, the funds once moved are not reversible and are hard to trace or follow.

Types of Scams

As a result of this increased activity, Boinnex has conducted a review of our internal procedures and have recently implemented a number of changes to our processes and purchase limits while also increasing our requirements for registration and KYC purposes. We are working with regulators and government bodies to do all we can to put a stop to scammers and protect our customers. This may cause some minor inconvenience to ourselves and to our customers in the short term but we believe it will be better for everyone in the long run.

There are many common scams to be aware of which we outlined in the previous post but for this article we will concentrate on the three types we have recently encountered and prevented on our network. Due to their design they are suited to utilising a physical Bitcoin ATM network and can cause the most financial damage to our customers if not stopped. The three types are; Romance Scams, Phone Extortion scams and Investment Opportunities. They are all very different in their structure and design but all share the common goal of getting the victim to send Bitcoin to an address the scammer has control over. Once a user buys and sends Bitcoin at one of our ATMs we cannot stop or reverse the transaction.

Romance Scams

By far the most common scam we have intercepted recently are Romance Scams. This is where the scammer builds a relationship with the victim over a period of time and gains their trust before asking them to send money via Bitcoin. These are all slightly different in each case particular to the circumstances of each person but they do hold some common themes that people should be aware of in order to identify and prevent themselves, a friend or family member from being targeted.

Romance Scam

They mostly target single or widowed women and make contact via Facebook or dating apps like Tinder, where they find out specific information and use this to better target the victim. They build up trust and a relationship over an extended period of time ( often months ) with a lot of interaction and assurance. They try to establish a bond quickly and ask a lot of personal questions. They start by requesting a small amount or suggesting they have an urgent need of a small amount like a €50 voucher and wait for the victim to offer to send money. They are then so thankful of this that it creates the setup for larger amounts that seem OK to the victim.
They are typically people from a different geographic area and they have a good job working on oil rigs or other high-value employment. Then something like an accident or theft/loss befalls them and the story is they are stuck in a foreign country and need funds to pay for hospital treatment or to recover/replace their documents.
Another story is they may request funds with the intention of coming to visit the victim, but this is less common during the restricted travelling ability with the covid pandemic.

Another common theme we have found is they request more money during a period of high stress for the victim like a recent bereavement, and the victim just sends money to keep the peace. The Guards have also written a good report on this to help identify if you are the victim of a Romance Scam.

Phone Extortion Scams

In our last article, we did cover Extortion scamsin relation to email as well as phone versions of this, but they were not so relevant as they were very uncommon in Ireland. Unfortunately there has been an increase in this type of scam mainly targeting foreign nationals living here. So much so in fact that the advertisement campaign linked in the introduction is targeted at mitigating these types of scams.

These scams were very prevalent in the US for years where a scammer would ring up a person and make out they were from the IRS ( tax service) or some other government body. They threatened the person that they owed a fine or a tax bill and if they didn’t pay up immediately they had police nearby and they would be sent over and arrested. This same general format has been taken and adapted to suit Irish victims.

Phone Extortion Scam

Scammers “spoof” or imitate phone numbers of important government bodies such as the Attorney general’s office or the Dept of Social Protection so when a person receives a call from a visible number that they can verify online they think it’s real. Depending on the circumstances they advise that the person’s Identity has been used to do something illegal or that their credentials have been found at a crime scene and they will be arrested shortly, or in the case of legal immigrants in the country they may be threatened with deportation.

They will be kept on the phone in a high level of stress and control and directed to go to their bank and withdraw cash to either pay a fine or to send their money someplace to protect it. This is where the Bitcoin ATMs come in, they are directed to deposit their money at a Bitcoin ATM in order to buy Bitcoin which is sent to the scammer’s Bitcoin wallet. The scammers are often very believable and will have used google search and social media to find out specific information about the victim which is then used to convince you that they are real, so be aware of what you post online.

Investment Opportunities

Another scam we have recently stopped is an “ investment opportunity” where the person is promised fantastic returns in a short period of time if they invest an initial amount of money with the company. The victim is targeted via an advertisement online, in a local paper or recommended via a friend – who has also fallen victim to this scam and thinks they are helping others. They are promised multiples of their initial investment in only a few months or a constant daily % growth as the scammer purports to have a special trading algorithm that can beat the markets and provide magical returns.

They will often keep up the pretense of the scam after the victim has sent on the initial investment amount and after a period of time tell them they have had great success and their investment has grown enormously…. But in order to receive your money you need to pay a fee ( commission fee, or insurance or transmittance fee etc ) which for some reason they cannot take from your current investment and this gives them a chance to get more money from you.

Investment Scam

This is also another version of a Ponzi or Pyramid scheme, except in a Ponzi Scheme in order to maintain the illusion of success and to get more investors to hand over money the scammer’s payout a certain amount to early “successful” investors. These winning “investors” will then recommend the opportunity to their friends and thus grow the scam. Things to watch out for are badly written emails and text communication with many spelling, formatting and grammar mistakes. Or the scammers using a standard Gmail or Hotmail address instead of a professional company domain.

Common themes and mitigations

There are many other scams such as Phishing scams, Ransomware scams and Sim swapping scams which also like to utilise crypto as a means of payment and if you want to learn more about them checkout our previous article. For all of the examples explained above there are some common observations and tips that can be helpful when identifying and avoiding scams.

  • They often target older and less tech-savvy demographics – so talk to older family members and make them aware of what to do or avoid.
  • They get information from social media sites or hacks – so try and limit the information you put online and change passwords frequently.
  • The scammers are often from other geographic regions and their english can sometimes be limited with bad grammar or formatting in written communications.
  • Look at how you’re addressed in an email. Scammers will use a general greeting normally
  • Research the organization thoroughly. Check consumer-protection websites and make telephone calls and send emails to verify authenticity.
  • Never click on suspicious links that are emailed to you

Conclusion

It’s important to remember there has always been scams and people that will take advantage of others – in this case Bitcoin is just being used as the mechanism to move value much like cash or venmo. Most fraud and illegal activity is carried out in paper cash around the world. We are working hard to protect our customers and the reputation of Bitcoin as we believe the features that make Bitcoin unique will provide greater benefits to the world than the actions of a few that tarnish this goal and image. As always if it sounds too good to be true then it probably is. If you have any doubts or suspicions stop and re-assess and dont send money or Bitcoin to anyone you don’t know.

Reach out to us at Boinnex for questions

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Damien

Damien

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