Anatomy of a Crypto Scam

As much as I back Crypto, it does need to be said that while working in the Crypto space you need to keep your guard up. There are lots of scams out there taking advantage of the fact that Cryptocurrency is A. New and B. Anonymous, two things that make scammers mouths water. Lets go over a good example of a prevalent Crypto-Scam that I see all the time and that you should be aware of. We’ll go into how and why it works and the thought process of the scammer, but most importantly we’ll breakdown how to spot scams every time.

Lets start with why this is enticing and why anyone would fall for it. People who don’t work or live in the crypto space only hear about it every 4 years or so when the price spikes and it’s all over the news (like right now). In the news reports they like to talk about how “if you would have put $100 in Bitcoin in 2010 you’d be a millionaire right now!!!” This creates a space in peoples minds where they are conditioned to believe that anything related to cryptocurrency has the potential to make anyone stupidly rich, immediately. The truth is that, yes a very small amount of people got incredibly lucky and made small fortunes but most of us have been spending our bitcoin over the years and being a part of the ecosystem to move the currency forward. The other important truth is that the investment potential for any asset takes time to gain value. So… If you’re on Instagram or Facebook and you see someone talking about how, if you invest some small amount of money, they’ll make you RICH and QUICK at that! I’m sorry to say that it isn’t true.

Here’s the setup, a social media account that regularly posts pictures of nice things (Expensive watches, supercars) and lavish trips while flaunting Cryptocurrency and talking about how “you are the only thing getting in the way of your potential” and “I’m just here to help you unleash your full potential.” Eventually the DMs start and an investment scale is presented:

$100 gets you $400 a week

$200 gets you $800 a week

$300 gets you $1200 a week

and so on.. The unsuspecting person (The Mark), who is, presumably down on their luck and probably in dire need of every penny in these Covid times, does the reasonable thing and starts at the entry point $100. “I’ll start with $100 and if it goes well we’ll ramp it up” they think to themselves. “$100 is a lot but if it makes $400 then I can make rent this month” they reason, to convince themselves that this isn’t a bad idea. The scammer gives a crypto address and asks for the $100 to be transferred.

There’s some back and forth and the scammer finally gets back to the Mark that “oh no, only $98 went through and the system is locked since it is set to automatically start at $100 and since you haven’t reached that level yet the crypto is tied up and there’s nothing we can do. But, if you try again to another address and make sure you send a little more than $100 to ensure that the minimum is reached, we’ll send you back the $98 right away.”

There’s a few red flags here. The scammer is banking on the chances that the Mark knows enough about crypto to have a wallet or to put some cash in Coinbase and transfer it out but beyond that only understands that crypto is inherently complicated so something like the account being “locked” isn’t completely insane. Also, Bitcoin is a payment method so if you sent $100 worth and paid all the fees on transmission, then $100 is what comes out the other end the “we only got $98” argument is complete nonsense.

At this point, the Mark sends $110 to be sure that at least the minimum of $100 gets across to “unlock the system.” Upon reciept, the Scammer tells the Mark that “everything is going great, all the funds have unlocked and your $206 has been invested, your money will make $824 on Monday. “

Did you catch that? They said they’d return the initial investment but now it’s all been invested but the pot has been upped from $400 to $824 so why not let this ride? Another thing to keep an eye out for is that these investment schemes often revolve around Mining because most people haven’t spent much time figuring out Crypto Mining, an endeavor that I will admit can be very complicated. So the Scammer will throw out names of Mining hardware to sound official or possibly to throw jargon around to sound like they know what they’re talking about. The Scammer I dealt with for the purposes of this article kept saying that “the Dragonmint T1 we use for our mining operation is incredibly profitable.”

This is the mining breakdown of a Dragonmint T1 right now with Bitcoin near its all time high. On a good month one of these things will make just over $50 so a quarter of that a week… For mining to be profitable you need to have very cheap electricity and do it on a ridiculously large scale, like raiders of the lost arc warehouse type scale. There are also legitimate ways of renting mine time for miners to pay off some of their hardware or electricity fees. They are much less complicated than this but I still wouldn’t recommend them.

Here’s another question you should ask yourself before getting involved with any of these people: If someone has a magical method of quadrupling money, why the hell would they share that with you and not just make enough money for themselves to buy a small island and continue quadrupling their fortune while never telling anyone their secret?

So let’s return to the scam. It’s now Monday and it’s time to pay the piper so the Mark reaches out to the scammer to see how their investment is going but the Scammer replies “It’s really hectic here and I’m processing payouts for investors who have been working with me for longer, I’ll get your cash out when it’s your turn.” So the Mark waits and, understandably, checks in once or twice a day for a couple of days, where they are met with “just hold on, I’ll let you know when it goes through.”

Now it’s Thursday and the Mark hears back from the Scammer and they have great news! “Your investment has done SO well that, unfortunately, it doesn’t fit into the investment tear that you signed up for.” (Rather than paraphrase like I’ve been doing so far, this next quote is directly from the scammer) “Your mining went eminently excellent but exceptionally few glitches has occurred which have resulted to an option that requires an upgrade to a golden premium plan so we can unlock your profit and access your profit will strongly advise you to make an upgrade on your investment plan from starter plan to a premium golden plan.” That request was followed by a request to deposit $300 in yet another Bitcoin account.

So, to recap, that was $100+$100 and now another $300 requested, and sadly, at this point the amount being promised is substantial enough that some people would have no issues scraping together their last $300 because the prospect of $1200 could possibly pull them out of a bad situation. I have to give it to the scammer, when I confronted them about this clearly being a scam and the fact that I was just doing research, he tried to keep the whole thing going:

So here are the major takeaways:

  1. If something sounds too good to be true, it probably is.
  2. Bitcoin may be performing amazingly but it’s not magic, it won’t convert your money into 4x it’s worth and not reliably or every week. That’s crazy.
  3. These scammers have been working on this for a while, they prey on people’s bad situations and dangle increasing amounts of money in front of their marks to get them to keep going.
  4. Broken English is never a good sign when financial transactions are involved.
  5. Cryptocurrency Mining is also not magic, you need huge amounts of electricity to make a profit and as you saw with the Dragonmint T1, about half of it’s profitability went into paying it’s power bill.

As always if you have any questions feel free to contact the site and let us know, have a great weekend and don’t get scammed!

5 comments on “Anatomy of a Crypto Scam

  1. Have you checked out Jessica Allen on Telegram and if she’s a scammer.?
    I just read about Instagram scams using her name , im on Instagram often and haven’t seen them.
    But are they using her name because she is legit on Telegram?
    I already started investing with her and am hesitant to take the last step
    Sincerely Ed


    • We have not checked out Jessica Allen on Telegram but I would be very concerned giving anyone with that name any money.


    • Cassandra

      She’s a scammer.. I invested with her she always asking you to send more you never gets the money.. it’s always upfront fees to pay like miners fees for job well done a No Block Fee (NBF) and taxation fee..


  2. James Humberd

    Do you have or recommend a service to get most of money back from a jessica allen scam? Jas. 503.380.4595


    • Unfortunately, most of these scammers operate out of the country and in values that are of very little interest to law enforcement. We are unaware of anyone successfully recovering their funds once sent. The federal Gov has some resources to report fraud, which we have done several times, but it will probably be more to help other people down the line than to ever recover your funds:


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: