If you want to buy Bitcoin in India watch out for these 5 Bitcoin scams and Bitcoin fraud schemes so you don’t end up losing your hard-earned money.
You may be asking the question, “Is Bitcoin legal in India? Is Bitcoin a safe investment?” Yes, if you do it right!
Recently in March 2020, Bitcoin India ecosystem got a big boost when the Honourable Supreme Court through its order, lifted ban on trading in cryptocurrency in India.
Although you can now buy Bitcoin in India by connecting your Bitcoin account to your bank account, you still need to watch out for some common Bitcoin scams and Bitcoin frauds like the ones listed below.
1. The High Return Scheme Fraud
These Bitcoin investment scams are pretty common wherein the company advises people to do investment in Bitcoin with said company and promises a high return to the investor.
They will also ask you to refer people to join below you in like in multi-level marketing (MLM) schemes, with a minimum Bitcoin investment.
To generate credibility in this Bitcoin fraud scheme and win your trust, these companies promise to invest your money in Bitcoin mining in India or in some other low cost mining countries and claim they will generate handsome returns for you.
The company pays you from the Bitcoin deposited by people lower to you in your MLM chain, and the return continues as long as there are investors joining at the lower levels.
Then one fine day, the company disappears with all the investors’ money as happened in the case of the Bulgarian convicted fraudster, Ruja Ignatova, who created a Ponzi scheme known as OneCoin, described as “one of the biggest scams in history.”
Since 2017, this “scam queen” was added to the Bitcoin scammer list and has been on the run from law enforcement, including the FBI.
She became the subject of the 2019 BBC podcast series, The Missing Cryptoqueen, and has been charged in absentia by U.S. authorities for wire fraud, securities fraud and money laundering.
Lesson: Always be wary of any scheme that offers unreasonably high returns.
2. The Wallet Service Fraud
A wallet service provider gives you the tool to create your own wallet to store your Bitcoin and other cryptocurrencies.
The service provider could be a web-based platform or a mobile application provider. In both the cases, the provider stores your wallet’s private key at its server.
One day the wallet service provider disappears with all the cryptocurrencies stored by people in its provided wallets.
MyBitcoin is one such case where the company disappeared with one million worth of users’ bitcoins.
Lesson: If it’s not your private key, it’s not your coin.
3. The Cryptocurrency Exchange Heist
This Bitcoin wallet scam is another of the cryptocurrency scams that many new investors fall for. Whenever you open an account with a cryptocurrency exchange you are provided with a crypto wallet.
But the private key of the wallet is stored on the exchange server. So if someone is able to access the server, they get access to all the coins. Again, if it’s not your private key, it’s not your coin.
The biggest cryptocurrency heist took place on Mt. Gox Bitcoin exchange launched in July 2010. By 2013, it was handling 70% of all Bitcoins.
In February 2014, Mt. Gox closed its operation due to the theft of 850,000 Bitcoins from its wallet. Later it was found that most of the Bitcoins were stolen from the hot wallet of the exchange over time starting from 2011.
In most cryptocurrency fraud schemes, the act is carried out by an insider who just needed to copy the database of private keys and got access to all the crypto-coins at those addresses.
To understand more about different types of wallets and choose your wallet wisely, get your copy of our Free eBook on crypto wallets.
Lesson: Never store a large amount of your cryptocurrency on any exchange.
4. Fake Bitcoin Wallets & Keyloggers
This Bitcoin scam allows Bitcoin scammers to gain unauthorized access to your wallets’ private keys in the following ways:
Fake Bitcoin Wallets:
Some fraudsters create fake Bitcoin wallet apps resembling genuine wallets. Such apps are launched on app stores and are used to steal your private keys and your coins.
Keyloggers are malware installed on your machine without your knowledge through a malware link. These applications record all your key strokes and send it back to the hacker.
The hacker then gets access to your private keys, wallet seed and thus access to your coins.
Lesson: Avoid scam Bitcoin sites. Only create your Bitcoin wallet on legit bitcoin investment sites and install antivirus and anti-malware software on your computer to avoid getting hacked.
5. Free Bitcoin Scam
A lot of newbies fall for what looks like the free distribution of cryptocurrency by high-profile Twitter handles.
In reality, Bitcoin scammers create fake lookalike crypto handles of famous people and claim to be distributing 2X crypto currency to those people who send them X number of cryptocurrencies.
Many gullible people fall for this Bitcoin fraud scheme and end up losing their cryptocurrency.
Lesson: There’s no such thing as a free lunch.
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