Naming Names -- A Study of CryptoScams

Week Two

by

W. P. Alexander

for 

Better Call Paul Blog

Hello faithful readers, and welcome to the Better Call Paul series on cryptocurrency scams.  Last week, we covered the "Empowr" network, a hybrid Ponzi type of scam that was finally outed when they flooded their economy with a huge supply of coins over what they claimed the max supply would be, effectively sending the coin into hyperinflation not seem since Weimar Germany. 

This week, we will be covering one of the original crypto scams, and to this date, probably one of the most successful in terms of what they were able to steal from their customers.  Of course, the scam I refer to is none other than.....BitConnect.  

So, BitConnect was a platform with its own coin (BCC).  The company allowed users to deposit funds and convert them to BCC, which could then be lended through their network for a pretty decent return.  

I have to admit that I fell victim to this scam personally, but the good thing was, I only lost money that I had previously gained from trading, so the loss didn't impact me that much -- I just hated to see it crash and burn.  

The BitConnect coin was also highly ranked and consistently held a high value, consistently being well above $500.00 on the exchanges.  It seemed like a project that was going to make it big.  

The problem was that the project had no way of sustaining itself, and the developers knew this -- leading to a situation that resembled classic Ponzi schemes to where those who entered late in the game lost their entire investments. 

State bureaucrats in Texas started to see red flags around the project, and issued a letter telling the company to cease all operations in Texas.  When this was made public, confidence in the project dropped.  The lending platform was suspended for users, and the developers made an announcement that they would be refunding all money to all users, but they would be doing so with the BCC coin, which was rapidly losing value.  

For instance, when they paid me out, my BCC went from being worth about $500 to just under $40 within a 45 minute period.  

Then, this happened: 

In a menacing turn of events yesterday, Bitcoin investment lending platform BitConnect abruptly announced it is shutting down its lending and exchange services. But while this sudden “curveball” might have come as a massive surprise for thousands of gullible investors, the writing was on the wall all along.

...and that was that.  BitConnect shut down and kept all of our money.  

So what can we learn here to prevent us "gullible investors" from investing in another scam project?  

First of all, all of us who invested in BCC were not "gullible."  The scam was very well created and everything about it seemed legit.  The BCC asset was holding its value, so BitConnect seemed a great place to invest.  However, because it was new, I decided I would only invest gains from other investments, that way if I lost it all, I wouldn't actually be losing anything.  Unfortunately, there were some folks who lost their entire cryptocurrency holdings to BitConnect. 

Steps to Prevent Being a Victim

1.  Never invest more than you are able and willing to lose.  This is the most important concept when it comes to investing in blockchain products.  If you use what you gained from other investments, then you never go against your own bottom line, and if you gain on top of that, you now have two layers of protection against your bottom line. 

2.  Do your Due Diligence.  Always research the platform you are about to invest in.  Look at market performance and value of the asset, of course; but you also need to investigate the project itself, not just its performance on the markets.  Are the developers active?  When was the last update to the project?  Does the project have a roadmap?  Are the developers meeting the goals on the roadmap?  Are there are posts or articles written about the project, etc.   

These are the questions that you should seek answers to before you invest.  

3.  Never listen to anyone promoting a project in a chat box.  On the exchanges, you will consistently see people who are attempting to manipulate that markets.  They will start saying things like "Buy BCC!  It's going to the moon."  These people are the reason that "pump and dump" exists.  Avoid these people and the projects they promote like the plague.  

4.  Start small.  This goes along with the first tip of only investing what you can afford to lose, but it is a bit different.  When investing in a new project, start small, play the market, and see if you are able to generate a profit, and then use that profit to try to generate more of a profit.  

If you follow these tips, you should be able to steer clear of these types of scams.  

BitConnect is considered by many to be one of the largest scams in the cryptosphere today because of the methods with which they were able to maintain the market value of their coin -- so those who got in early and sold when the value was up actually made money, while those who got in late quite frankly had the potential to lost everything, and many did.  

So, that's the expose on BitConnect.  Many of you are already aware of the BCC scam, but a CryptoScam blog series wouldn't be complete without mentioning the granddaddy of 'em all!  

Until next week....

Deo Volente

W. Paul Alexander 

[In the comments sectionx, please feel free to tell me what scam you would like me to expose next]