Don’t Fall For These Cryptocurrency Scams

Don’t Fall For These Cryptocurrency Scams

Category : Cryptocurrencies

While the cryptocurrency market can be a good way to make money, it is also a prime target market for scammers. In this article, we’ll look at some of the most common bitcoin schemes and how to protect yourself from falling for them.

Don’t Fall For These Cryptocurrency Scams

Be Weary of Cryptocurrency Giveaways

Amongst the various types of bitcoin schemes, many of the top people and projects in the industry are concerned with the prevalence of giveaway scams. These scams often take place on popular social media platforms, especially Twitter. Big names like Vitalik Buterin even list “Not giving away ETH” in their profiles to make the cryptocurrency community aware of this issue.

Typically, these scams will tell people to send ETH or BTC to a given address. The scammer promises to give that person more ETH or BTC in return. While this might seem like an obvious scam, the number of profiles that include “Not giving away ETH” make it apparent that this type of scam is quite rampant.

Even in the case of legitimate airdrops or bounty programs, the amount of funds given away are typically much lower. Most importantly, legitimate giveaways would never ask a user to send funds first and then give funds in the same cryptocurrency back.

“Guaranteed Returns” on ICOs

In some financial markets (i.e. bonds, CDs, etc.), banks guarantee returns of a certain amount. However, this is not the case in other financial markets. Much like in the stock market, the cryptocurrency market has no profit guarantees. Any cryptocurrency ICO that guarantees that the price of its token will rise to a certain percentage is likely to be a scam. ICO scams continue to be a problem for the cryptocurrency market, especially due to the lack of regulatory frameworks throughout the world.

Even if it is very possible that a given cryptocurrency will rise in value over time, scams are likely to use precise numbers and phrases like “guaranteed returns”. Similar to the giveaway scam, these ICOs will ask investors to send BTC, ETH, or other popular cryptocurrencies to the scammer’s wallet address.

The problem is that almost every cryptocurrency project (legitimate or not) relies upon this type of exchange of funds. The only major difference, in the end, is that a scam doesn’t send tokens in return.

So what separates ICO scams from legitimate ICOs?

While some fake projects guarantee returns, legitimate ones do not. Legitimate ICOs typically have several positive reviews, verified team members with KYC and AML checks, established strategic partnerships, and other factors.

Cloud Mining Scams

Cloud mining continues to be another popular option for bitcoin schemes.  The above-mentioned cryptocurrency scams might appear to be more obvious. In contrast, cloud mining scams often seemingly appear more legitimate. In some cases, cloud mining companies guarantee returns. Again, this is an obvious scam, especially since it’s very difficult to predict cryptocurrency price fluctuation.

Sometimes, fake cloud mining companies are disguised much better and don’t include guarantees on returns. They merely charge users a subscription fee upfront without any real chance of profitability. It’s also worth noting that even the most popular and legitimate cloud mining companies do not offer a good return on investment.

Even if you are thinking about going with a legitimate cloud mining service, it’s important to consider how long it will take you to get a return on investment. Most of the time, it’s easier to make profits via mining rigs or cryptocurrency trading. In any case, always thoroughly read reviews on any cloud mining service.

Don’t Go Phishing

There are few different types of crypto-related phishing scams that anyone should be aware of. First, emails that attempt to fool users into thinking that they are a popular service are commonly scams. For example, a scammer might send a fake security alert saying that someone has just tried to log in to a user’s account. This type of email generally asks a user to click on the link to verify that everything is fine. A scammer can even ask a user to participate in a survey or giveaway by clicking on the link.

Once a user provides the scammer with sensitive data (i.e. login credentials, private key, etc.), the scammer then has the information needed to hack the user’s account. In some cases, scammers have created Facebook pages and other social media accounts in order to pretend to be a legitimate exchange. Sometimes, scammers even create Google ad campaigns. Always be careful of the outbound links and try to verify that you are going to a legitimate website.

There are a few ways to prevent against phishing attacks. First, it’s always important to make sure that you are going to the correct website. Sometimes, the URL can be similar enough to make you think it is a crypto-site that you use on a regular basis. By verifying that you visit the correct URL every time when entering login credentials, you can keep your funds safe.

Another way to prevent scams is through increased security measures. For example, by enabling two-factor authentication (2FA), you can make it a bit more difficult for hackers to access your actual accounts in case you accidentally fall for a phishing attack. Hopefully, by setting up 2FA, you will be able to increase the security of your funds.


In an age where it is actually possible to become a ‘crypto millionaire’, it’s also important not to think that doing so is easy to accomplish. It should be a top priority for any investor to understand how to prevent from falling for bitcoin schemes. The types of cryptocurrency scams mentioned in this article provide just a few examples of what to watch out for.  By using these strategies to detect various scams, it will be simpler to mitigate potential risks and sort out the real opportunities from the fake.

Article originally appeared on Coincentral.

Cryptocurrency Tax in a Nutshell

A new year has arrived! For cryptocurrency investors, that means hope for another year of growth in virtual currency markets. Unfortunately, however, it also means we need to get ready to pay taxes on our cryptocurrency profits from 2017.

Most of us have made our resolutions and decided on our aspirations for 2018, but few of us are looking forward to filing our tax returns. But being prepared is half the battle, so now is the time to begin tax planning.

It’s always a good idea to consult with a Certified Public Accountant (“CPA”) when you’re preparing your tax returns. A good CPA can help you avoid tax liability by managing your assets in a smart way. However, your regular accountant probably isn’t up to speed on the evolving landscape of cryptocurrency tax policies. If you’ve invested in Bitcoin or other virtual currencies, contact a trained cryptocurrency accountant to make sure you’re prepared for tax season.

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Cryptocurrency Taxes 101: What to Know Come Tax Season

Cryptocurrencies may have started off on the fringes of the internet, but now it’s a pretty mainstream investment.  Bitcoin futures are traded on the Chicago exchanges, and large institutional investors are setting up virtual currency trading desks. As cryptocurrency has become more and more popular, the Internal Revenue Service (“IRS”) has refined the details of its policies regarding tax collection and reporting requirements.

The IRS treats Bitcoin and other virtual currencies as capital assets because they are convertible into cash. So, like other capital assets, cryptocurrencies are subject to the capital gains rules. These rules apply to taxpayers who buy and sell cryptocurrencies for investment purposes, as well as people who spend virtual currencies on goods and services.

Just like other capital assets, your tax rate depends on how long you held them before you sold them, as well as the price you bought in and the price you sold out. If your capital losses on your cryptocurrency investments exceed your capital gains, you can claim the loss as a deduction on your income tax returns up to $3,000.

When you’re figuring out how to properly report your cryptocurrency gains on your 2018 income tax return, start by finding out your cost basis. Your basis is the cost you actually paid for a virtual currency when you purchased it, adjusted for any related costs. This means you can deduct commissions related to the cryptocurrency purchase, such as the percentage that Coinbase takes out of every exchange. Notably, however the cost basis for your cryptocurrency investments does not include investment-related fees. Fees accrued for cryptocurrency trades in 2017 must be listed separately on a Schedule A form attached to your returns, assuming you itemize your deductions.

When you purchase a cryptocurrency, you’ve established your cost basis. However, the asset is not actually taxed until you sell it. This is when you “realize” your gains or losses on the investment. So, if you bought Bitcoin at $12,000 and sell it for $13,000, your realized gain is $1,000 even if it dips below your initial purchase price at some time in between. Sounds simple enough, right? Unfortunately not.

When it Comes to Cryptocurrency, Things Get Complicated Quickly

Unlike stocks, which are straightforward buy-and-sell transactions, pretty much any disposition of virtual currency assets is a taxable event. Tax liability is triggered when you trade your cryptocurrency for cash or other virtual currencies or whenever it’s used to purchase goods or services. Depending on your investment and spending habits, this can make things complicated.

Contrary to the popular belief – and wishful thinking – of many cryptocurrency investors, cashing out of your cryptocurrency investments isn’t the only taxable event in the lifespan of your investment. For example, if you make a purchase using Bitcoin on, this is a transaction subject to capital gains tax. Tax liability also arises when you trade one virtual currency for another, which is an almost daily occurrence among the more courageous cryptocurrency investors.

Also, because the IRS doesn’t impose the same third-party reporting requirements for virtual currencies as other more highly-regulated assets, you won’t get a Form 1099 from your exchange, client, or employer at the end of the year. This means you won’t get an official report of your cryptocurrency income. Rather, it’s your responsibility as the investor’s to properly report your virtual currency gains and losses. There is very little official guidance from the IRS on virtual currency reporting requirements, so consulting with a trained cryptocurrency accountant this tax season is a very wise choice.

Federal Tax Reform Impacts Cryptocurrency Taxes

If you ask any accountant about the impacts of the 2018 tax reforms, you will likely get an exasperated sigh in response. Cryptocurrency tax policy is pretty vague as is, and adding the complexities of major tax reform only makes things even more complicated. While the full impact of the federal tax reform remains to be seen, there are a few policies that definitely impact virtual currency investors.

The recent federal tax reform changed the rules of the game for many cryptocurrency investors. For example, starting in 2018, you can no longer include cryptocurrency-related fees in your itemized deductions on your personal income tax return. This deduction is still allowed for businesses, however. The 2018 tax reforms also change the capital gains tax rates, which may greatly impact your investment decisions. Holding on to your cryptocurrency assets for another few months may save you – or cost you –  thousands of dollars on your federal income tax returns.

A skilled cryptocurrency accountant can help you plan for the upcoming changes in the federal tax code, especially as they pertain to your virtual currency wallet. If you bought or sold cryptocurrencies in 2017 – or if you’ve thus far failed to report your cryptocurrency investments from prior rules – it’s a good idea to discuss your investments with a CPA that understands the ins-and-outs of cryptocurrency tax policies.

“This article is originally published at

CoinCentral’s owners, writers, and/or guest post authors may or may not have a vested interest in any of the above projects and businesses. None of the content on CoinCentral is investment advice nor is it a replacement for advice from a certified financial planner.

Mario Costanz

Mario Costanz is a lifelong entrepreneur and has had built and sold a number of successful businesses in the internet, restaurant, real estate, and income tax preparation industry. He was named to the “One to Watch” section of Accounting Today’s 2017 Top 100 Most Influential in Accounting List. More information and contact can be found at and

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