Beware the dark side of the cryptocurrency
The cryptocurrency may be our future, but every hype attracts a lot of people who want to steal money from investors.

Do not let them fool you!

Our project is dedicated to gathering insider information and reports and serve as an early warning system for investors.

Also, we provide the latest news about recent cryptocurrency scams so we can learn from the mistake of others.

Our team is not affiliated with any cryptocurrency projects, we just want to make the cryptocurrency world more transparent and honest even in this early deregulated period.

Join our Telegram channel to get early warnings: https://t.me/CryptoScamReport
March 5, 2018
Emercoin, Hashflare, Polybius and Hashcoin scam
We finally have some information and proofs about Emercoin, Hashflare, Polybius and Hashcoin affiliation and dubious practices.

First, Hashflare for some time accepted only one cryptocurrency besides Bitcoin - Emercoin and that is already suspicious. They have not accepted more popular currencies like Zcash, Ethereum, Litecoin, etc.

Second, Hashflare has changed the terms several times already, first by limiting all "lifelong" SHA-256 (Bitcoin) contracts to 1 year in August 2017 and then by changing the BTC minimum withdrawal amount to 0.05 BTC, effectively locking the funds of everyone who invested relatively small amounts of money. Also, the withdrawal fee was raised to 0.0007 BTC, but actual withdrawal fees that Hashflare pays can be seen in blockchain and it is significantly less than that amount.
That suggests lack of liquidity, they do not have the money to pay back and they are inventing the way to lock most of the money.

Comparing the companies information on the websites, you can see that the same people own Hashflare, Emercoin, and Polybius. The main company is called Hashcoins.

Hashflare looks like a classic Ponzi scheme and, most probably, they do not have sufficient mining equipment to actually mine on all the contracts they have sold. Also, they have referral scheme that isn't even trying to disguise itself as non-Ponzi. They will give you some instant kickback if you will refer other people and they will invest in Hashflare.
Hashflare has even offered cashback via Letyshops cashback service! Now this cashback scheme is suspended, but you can still see Hashflare on the Letyshop website: https://letyshops.com/shops/hashflare
This shows that Hashflare is really desperate for cash right now.

Polybius should be a second Ponzi scheme under a different name, they also accept Emercoin as payment, besides BTC, ETH, and USDT.

How have they managed to keep this truth hidden for so long?

They have printed their own money to fuel the Ponzi!

If you can make your own money - Emercoin - you can run the Ponzi for a really long time, without any real mining equipment and investments.

And while Emercoin team claims that Emercoin is a perfect currency for some services like DNS, SSL and other trusted storage, it was mostly used to fuel Hashflare and Polybius.

The legitimate uses for Emercoin would never get even the tenth of the same trading volume.

So, the Emercoin price rise was in turn fueled by these Ponzi schemes.

The truth has already started to leak out, you can check these sources as well:
https://www.reddit.com/r/hashflare/comments/7l3rll...
https://www.scambitcoin.com/hashflare-io/

Once more people will realize this, they will try to pull their money out of Hashflare and Polybius. Like with any Ponzi scheme, there would be not enough money to pay everyone, Hashflare and Polybius will invent some other excuses for not paying back and will eventually default and take the Emercoin value with them.

My advice is to stay clear of Emercoin, Hashflare, and Polybius and pull all the money out now if you do not want to lose them. There are a lot of reputable cryptocurrencies around, so you can just invest in something honest and useful.

Permanent link for this post: http://cryptoscamreport.org/emercoin-hashflare-pol...
March 3, 2018
Beware of Thanatos, the latest cyber-extortion scam
Another ransomware program is infecting computers, and it’s demanding Bitcoin Cash to let users unlock their files. A report at Bleeping Computer highlights the new ransomware, dubbed Thanatos, that was unearthed by security experts at MalwareHunter Team.

What makes this particular infection noteworthy is that it creates an encrypted file, but the key is not saved anywhere. Whether by accident or design, there’s no way to easily unlock a computer once it’s been compromised. Even if you do pay the ransom, it’s unlikely the developers of the malware will ever be able to decrypt your data.

It is possible to use a brute force method to discover the encryption key, however. Users infected with Thanatos are strongly advised not to pay the ransom and instead contact a cyber security firm for assistance.

After a computer is infected, all the encrypted filename extensions are changed to.THANATOS. A ransom note in the form of a README. txt file pops up whenever the user tries to log on, demanding $ 200 in cryptocurrency to decrypt the files.

Thanatos is noteworthy in that it’s the first ransomware scam to accept Bitcoin Cash for payment, along with Bitcoin and Ethereum. Bitcoin Cash is a spin-off of regular Bitcoin caused by a "hard fork" in the currency, similar in practice to a stock split.

Cryptocurrency is quickly becoming the payment method of choice for online extortionists; CCN reports that 34 ransomware schemes netted $ 25 million over a two-year period. Most criminals were using the Bitcoin exchange BTC-e to redeem their extorted funds. BTC-e has been used to launder money in the past, and several countries have called for legal oversight of the shadowy exchange.

Bleeping Computer has an in-depth guide that outlines some steps you can take to protect your data, such as anti-ransomware security software that includes behavioral detection algorithms. We’ve also compiled an overview of some of the best free anti-virus software to help keep your computer up and running.

You’ve heard it a hundred times, but it bears repeating: Always back up your data, always update your OS to the latest version, and don’t use the same passwords for multiple applications.

Source: https://www.digitaltrends.com/computing/thanatos-r…
March 3, 2018
Latest Crypto Scam Uses Virtu's Trading History to Fool Users
The latest scam in the cryptocurrency market comes from a non-existent coin that falsely claims to be backed by Virtu Financial Inc., the electronic-trading firm that famously lost money on only one day from 2009 to 2014.

Virt Coin issued a press release Thursday that said Doug Cifu, Virtu’s chief executive officer, was about to issue the digital currency. "Totally fake," said Andrew Smith, head of investor relations at New York-based Virtu. An email to an address on the Virt Coin website wasn’t immediately returned.

"Virtu has notified the appropriate authorities and intends to commence all necessary legal actions to defend itself from any attempt to infringe on Virtu’s copyrights, trademarks and intellectual property," the company said in an emailed statement Friday. A search on Coinmarketcap.com, which tracks over 1,500 digital coins, found no reference to Virt Coin.

Scams on social media related to digital currencies have been spreading in recent weeks, often promising to send a large amount of Bitcoin or Ether in exchange for a small deposit of the same cryptocurrency. The fake accounts use altered profiles of well-known people or companies to make the offer appear legitimate.

The scam involving Virt Coin could be slightly different. It may try to entice people to send Bitcoin or Ether to an address in exchange for early access to Virt Coin. Because there is no such thing as Virt Coin, that money would be stolen.

The history of Virtu adds an ironic twist to the scam. Vincent Viola, the billionaire founder of the company, named it for the Latin word "virtus," which drew on the attributes of valor, character and worth.

Source: https://www.bloomberg.com/news/articles/2018−03−02…
March 1, 2018
Fake Website Scam Targets Aspiring Telegram ICO Investors
Amid a flurry of reports about messaging app Telegram’s multibillion-dollar initial coin offering (ICO), a newly-created website appears to be attempting to ensnare would-be investors.

The website, hosted by the "Telegram Foundation," is seeking funds for what it calls the "public ICO" for the Telegram TON token. Yet as reported by CoinDesk and other outlets, the sale has largely taken place behind closed doors, with the only publicly available information related to the offering coming in the shape of a Form D filed with the U.S. Securities and Exchange Commission.

On Thursday, CoinDesk received reports of a fraudulent email attributed to Telegram, and also located a Twitter account with the username "Telegram ICO (TON)" and the handle, @ico_ton.

A screenshot of the email shows an effort to pitch the Telegram Open Network public token sale, which it states is accepting bitcoin, litecoin and ethereum as payment methods.

The email goes on to say:

"Our efforts in creating a better blockchain cannot take effect unless we get the support of as many participants as possible. In return for your contribution we will continue developing this blockchain even further, giving you more advantages within the blockchain technology."

Yet the associated website was registered on Feb. 12, around the time that details of the token sale emerged. According to information from Whois.com, the site’s registrar is MaxiDed, which per its website "is a real legit company, is an international organization officially registered as MaxiDed Ltd" and is based in Dominica.

A second website that appears to be associated with the scheme, telegram-ico.org, triggers a Cisco cybersecurity warning when accessed. That website was registered in Russia on January 26, Whois data shows. The Twitter account attributed to the Foundation was also launched in February of this year.

Telegram’s billion-dollar token sale has previously been targeted by such campaigns, as CoinDesk previously reported. The efforts are perhaps unsurprising, given the ICO’s high-profile status as well as the prevalent trend of social media-based cryptocurrency scammers.

Earlier this week, it was reported that hackers recently hijacked verified Twitter accounts to pose as prominent individuals and entities in the crypto industry.

Representatives for Telegram did not immediately respond to requests for comment.

Source: https://www.coindesk.com/fake-website-scam-targets…
February 27, 2018
$50-million cryptocurrency scam cripples South African investors
More than 27 500 people‚ including South Africans‚ Americans and Australians have been duped by the one of biggest bitcoin scams to hit South Africa.

Hawks spokesman Captain Lloyd Ramovha on Thursday confirmed that the serious commercial crimes unit was investigating complaints against BTC global‚ a company in which thousands invested cryptocurrency valued at more than $ 50-million by transferring bitcoins into an online wallet address.

"I have spoken to one of the investigators in our team and he has confirmed that this matter came to them about two weeks ago. There are in excess of 25 700 complainants with many outside South Africa.

"The amount is over $ 50-million and could rise as more victims come forward‚" Ramovha said.

He could not confirm if the scam artists were South Africans.

"The investigation is in its infancy. I also cannot say whether it is a Ponzi scheme. BTC Global is being investigated for contravening the Financial Advisory and Intermediary Services Act‚" he said.

Numerous victims from across the country told TimesLIVE that they had invested between R16 000 and R1.4-million with BTC Global as forex and commodities trader "Steve Twain" was a "master trader".

They received inconsistent weekly payouts until "Twain" disappeared two weeks ago.

They now believe that "Twain" did not exist.

His administration team wrote on Facebook two weeks ago that they could not locate him.

Source: http://www.heraldlive.co.za/news/2018/03/01/50-mil…
February 27, 2018
Texas Regulator Orders Another Crypto Scam To Stop Selling Fraudulent Securities
The Texas State Securities Board has issued an emergency cease and desist order on Feb. 26 to website Leadinvest.com, citing a failure to disclose information about its specialists and cryptocurrency mining activities, as well as fraudulently selling unlicensed securities and overall "[threatening] immediate and irreparable harm."

Already in January of this year, the Texas State Securities Board has sent two other cease and desist notices to crypto-related organizations: one to alleged Ponzi-scheme Bitconnect for selling unlicensed securities, and another to "cryptocurrency bank" AriseBank for not actually being a bank, making this Feb. 26 notice the third order of this year.

This newest cease and desist order begins by detailing how all of LeadInvest’s staff photos are either stock images or images of other people that have no association with the company.

The website is still active but contains older numbers for cryptocurrency prices, like citing Bitcoin’s (BTC) "all time highs of $ 1000" in 2014 as the last price point under the "Cryptocurrency" section, although different parts of the site have more updated numbers.

The cease and desist letter adds that LeadInvest "agents" are told that they will receive a ten percent commission for all new clients that use their referral link, and that LeadInvest is violating securities laws by "recruiting individuals who are not registered with the Security Commissioner to act as its agents."

LeadInvest’s website claims that since their founding in May 2010, then have moved their Bitcoin mining to Iceland due to the access to geothermal and hydroelectric energy. The cease and desist letter writes that LeadInvest intentionally does not disclose information about its mining rigs, as well as the risks associated with crypto mining.

Iceland actually has been experiencing a crypto boom of miners coming to the island for this access to both forms of alternative energy and the naturally colder climate.

According to data from LeadInvest’s website, more than 190,000 accounts have been created and more than $ 177 mln has been invested in their system. The Texas State Securities Board writes that LeadInvest has been deliberately not disclosing the use of the funds that investors have given.

The Board’s cease and desist letter ends by citing the "misleading and deceptive statements" made about the identities of people associated with LeadInvest and the statements on the website that promise that investors are adhering to laws and regulations, which Texas says they aren’t.

LeadInvest must cease all activities related to selling securities, acting as a securities dealer, fraudulently offering securities, and misleadingly offering securities, as per the cease and desist order.

LeadInvest had not responded to requests for comment by press time.

Source: https://cointelegraph.com/news/texas-regulator-ord…
February 25, 2018
Cryptocurrency Scammers Hijack Verified Twitter Accounts to Trick Users
Cryptocurrency scammers are currently using Twitter to take advantage of naïve investors looking to make some easy money. Often, the scammers pose as influential community members, and promise those that send them a specific cryptocurrency a reward a number of times greater than the initial donation. Now, they even started hijacking verified accounts to look more credible.

To legitimize the move, these scammers then add fake replies to the tweet asking for donations. These replies usually claim they’ve received the funds and thank the person. These scammers are usually easy to spot, as they use recently created accounts, with usernames with extra letters, and without a blue checkmark only Twitter can give its users.

According to Buzzfeed News, scammers recently managed to create a fake, verified Twitter account for Tron Foundation, the organization behind TRON (TRX). To do this, they seemingly hijacked the account of Literacy Bridge, a nonprofit based in Seattle that’s focused on "improving the health, income & quality of life for the world’s most underserved communities."

After taking over Literacy Bridge’s verified account, the scammers changed its profile picture, pinned a tweet just like the one the real Tron Foundation has pinned, and changed the handle to "tronfoundationl" - notice the extra "l".

Using the fake account, the scammers then replied to a tweet posted by Justin Sun, Tron’s founder, asking for donations. The tweet, according to Buzzfeed, received over 200 likes and retweets, presumably thanks to the blue checkmark.

Some Twitter users noticed the change, and quickly spread the word.

Geoff Goldberg, a Twitter user who frequently calls out spam accounts, spotted the fake Tron Foundation. Speaking to Buzzfeed News, he stated:

"I saw it was a verified account so immediately was intrigued. To me, it was clear it was a scam, given that I have been encountering these for quite some time. But to others, given the verified account, I could totally see people falling for it."

After BuzzFeed and the Tron Foundation reported the fake account, it got taken down. This, however, wasn’t an isolated incident. Hackers seemingly managed to hijack another verified Twitter account belonging to a luxury menswear design team in London, going by "adaxnik." After hijacking his account, the hackers then spoofed Justin Sun’s account.

At press time, Tron’s founder seemingly has two verified accounts on Twitter. One of them is trying to help users stay safe and expand Tron’s reach. The other one claims there’s a Tron airdrop on the way, and is sending users a link to a fake website I wouldn’t dare click on.

Twitter may have a share of the blame as well, as it’s supposed to remove verified accounts once their username changes. At the end of the day, Binance CEO Changpeng Zhao, who recently got his Twitter account verified, makes things clear: DON’T TRUST ANYONE ASKING FOR OR OFFERING MONEY ON TWITTER.

Source: https://www.ccn.com/cryptocurrency-scammers-hijack…
February 23, 2018
Ethereum Scam: Fake Elon Musk Twitter Account 'Giving Away 5,000 ЕTH'
Scammers have struck again, using a method that is fast becoming old — by impersonating Elon Musk on Twitter. On Wednesday, a post from an account pretending to be of the SpaceX CEO said he was giving away over $ 4 million worth of Ethereum to celebrate the launch of the company’s Starlink satellites.

But there was a catch to giving away all that precious cryptocurrency, which is where the scam kicked in. The scammer, who used the same profile picture that Musk uses for his official Twitter account (though there are small differences, if you look closely), created an account — @elonhmusk — which looks very similar to Musk’s. And the fake account that posted a tweet in reply to Musk’s, making it look like a tweet from Musk to anyone unfortunate enough to be gullible to a blatantly incredulous claim.

If someone sent their ethereum to the address in that tweet, it is certain they would never see it again, let alone the promised ten-fold instant return on investment. But then, there are so many red flags in that post that anyone who values their ethereum tokens would not actually send any money, unless they were blinded by their excitement and hopes of making a quick buck without doing anything.

If you got fooled by the similar looking pictures and handles, the tell-tale missing blue tick of verification is missing in the scammer’s account. And clicking on that profile shows a grand total of one tweet, and that the profile was created in January 2018. Then, there are problems with the content of the tweet itself.

For starters, there is the value of 5,000 ETH tokens, which given Wednesday’s closing price, would amount to almost $ 4.3 million. Musk is known for many things, and he could probably afford to give away a sum like that if he wanted to, but such bizarre philanthropy aimed at random strangers (some of whom maybe didn’t even need the philanthropy) to celebrate the launch of two communication satellites would perhaps be a stretch for anyone in their right mind.

Then, of course, there is the fact that the scammer is asking for ETH to be sent first, in order to receive the cryptocurrency back. The purported reason is to share your ETH address, which could actually be done much the same way the scammer’s ETH address was shared in the tweet, or through other means too, that didn’t involve sending money over. Or, it could have been a minimum of 0.01 ETH (worth about $ 8), instead of 0.5 ETH (which is over $ 400), that the scammer was asking for.

There is also the matter of sending ETH back to those were late to the scam. Every cryptocurrency transaction has a cost associated with it. If the offer was real, and everyone was getting a minimum of 5 ETH, there would be a maximum 1,000 recipients, before the overflow ETH began being returned to their original owners. The sender (in this case, the scammer) would also have to bear the transaction costs out of their pocket, or the recipients would receive less ETH than they sent initially, to adjust for the transaction fee involved.

Twitter has previously suspended accounts like @elonmus_ and @elonnmuusk for trying similar scams as recently as this month. They all used the same modus operandi and even the preferred choice of cryptocurrency was ethereum.

If something looks too good to be true, it usually is false. So if you see something like that, please take the time to verify it the best you can to minimize your risk of losing money.

Source: http://www.ibtimes.com/ethereum-scam-fake-elon-mus…
February 22, 2018
Emercoin wallet security vulnerability alert
A zero-day vulnerability was recently found in the Emecroin wallet software by the Russian cryptocurrency security research team Digital Security.

The vulnerability exists in the main wallet code, so it is present on all platforms, including Windows/Mac/Linux, Android, iOS, and Cryptonator.

Due to insufficient randomization during cryptographic seed generation, it is possible to brute-force 12-word Wallet Back Up Phrase for any Emercoin wallet using high-speed algorithm running on GPUs.

The exploit is already in the wild and some users have reported that they have lost a large amount of money in Emercoin after their wallets were hacked.

The security design of Emercoin wallet prevents using more than 4 concurrent threads for brute-force, so at most 4 GPU can be used for brute-forcing the key.

This number of GPUs limit brute force time to around 12 hours on the fastest GPUs available today.

Until this vulnerability will be patched by the Emecroin team in the next version of the Emercoin wallet software, the only way to make sure that your funds would not be stolen is to create a new wallet every 8−10 hours and transfer the funds there, so hackers would not have enough time to crack the key.

The exchanges are also not safe and would be the primary target for the hackers due to a large amount of Emercoin funds deposited there.

We hope that this vulnerability is related only to the wallet software and not to the blockchain itself. If this is the case, it should be fixed relatively soon and full blockchain fork would not be necessary.

Some technical details about the bug can be found on the Russian Emercoin wiki: wiki.emercoin.com/ru/Errors

There is no detailed English description at the moment

We will publish updates as soon as we find any new information about this issue.

Permanent link to this post: http://cryptoscamreport.org/02222018-emercoin-wall...
February 21, 2018
U.S. Regulators Offer Bounty for Tips on Cryptocurrency Pump and Dump Groups
The U.S. Commodity Futures Trading Commission (CFTC) has recently issued an advisory and bounty for whistleblowers providing information on cryptocurrency pump-and-dump schemes. The agency is advising customers to be wary of these schemes that commonly prop up scarcely traded cryptocurrencies.

The CFTC advisory stated:

"If you have original information that leads to a successful enforcement action that leads to monetary sanctions of $ 1 million or more, you could be eligible for a monetary award of between 10 percent and 30 percent."

Within the advisory, the CFTC also stated that people who provide "original information that leads to a successful enforcement action that leads to monetary sanctions of $ 1 million or more" are eligible for a reward of 10 to 30 percent of the sanction.

According to the CFTC, "pump-and-dump" is a phrase commonly affiliated with penny stock schemes, where groups of traders would falsely "pump" a company. They would do so by "falsely promising the companies were on the verge of major breakthroughs, releasing groundbreaking products, or merging with blue chip competitors." This fraudulent information would increase the demand in "thinly traded companies," and in turn, the share prices would rise. Once the prices struck a certain point, the trading group would then "dump" its shares, leaving investors with worthless stocks.

The old scam is now being reframed to fit cryptocurrency technology, utilizing private group messaging apps like Discord and Telegram. On these apps, the CFTC reports, pump-and-dump traders organize groups anonymously. Some of these groups have thousands of subscribers waiting for messages indicating the next altcoin to be pumped and dumped. Once a cryptocurrency was ready to be "pumped," messages would be issued to count down the buy signal.

The pump-and-dump cycle sometimes takes just minutes. Owners of the groups often have the cryptocurrency that’s to be pumped already bought, giving them an advantage to cash in on profits and leaving the rest of the people in the group racing to save what’s left of their investment when the price begins to tank.

False news reports are a commonly used method to promote these schemes. Groups reportedly spread fake news stories about famous business leaders, major retailers, banks, or credit card companies announcing plans to partner or invest in certain cryptocurrencies.

Erica Elliott Richardson, CFTC Director of Public Affairs, said in a statement:

"Pump-and-dump schemes long pre-date the invention of virtual currencies, and typically conjure the image of penny stock boiler rooms, but customers should know that these frauds have evolved and are prevalent online. Even experienced investors can become targets of professional fraudsters who are experts at deploying seemingly credible information in an attempt to deceive. The CFTC encourages all customers to thoroughly research potential investments, stay informed about tactics commonly used in investment fraud, and avoid investment opportunities they don’t fully understand."

The CFTC has reported receiving numerous complaints from people losing money in pump-and-dump campaigns. The commission advises people purchasing alternative cryptocurrencies to remember the following:

"Don't purchase digital coins or tokens because of a single tip, especially if it comes over social media.

Don’t believe ads or websites that promise quick wealth by investing in certain digital coins or tokens.

Do not participate in pump-and-dump trades; market manipulation is against the law and many participants end up losing money.

There is no such thing as a guaranteed investment or trading strategy. If someone tells you there is no risk of losing money, do not invest."

Source: http://truthinmedia.com/us-regulators-bounty-tips-…

February 20, 2018
Australian Watchdog Received 1,200 Crypto Scam Complaints in 2017
Australia’s consumer watchdog has reportedly received over 1,200 complaints about cryptocurrency scams in 2017.

According to the ABC’s current affairs program 7.30, data obtained from the Australian Competition & Consumer Commission’s (ACCC) Scamwatch program indicated it received 1,289 complaints related to crypto fraud in 2017. Losses totalling $ 1,218,206 were also reported.

Speaking to the show, Australian Securities and Investments Commission (ASIC) commissioner John Price warned that, "It's been quite well documented that some of these products are scams, so please don’t invest unless you’re prepared to lose some or all of your money."

The news comes two months after the country made regulatory changes to more closely control its crypto industry. In December, the Australian Transaction Reports and Analysis Centre (Austrac) received the go-ahead to monitor Australia’s bitcoin exchanges.

The move meant exchanges in the country must register with Austrac and be placed on a dedicated register. They are also required to set up other procedures, including countering the risks of money laundering and terrorism financing, verifying customers' identities, and maintaining some records for seven years,

Regulators and other authorities elsewhere around the globe are also increasingly starting to take action on fraudulent crypto schemes.

CoinDesk reported in January that the New York County District Attorney’s Office has shut down more than 70 allegedly fraudulent bitcoin investment sites.

And both the U.S. Securities and Exchange Commission (SEC) and Commodity Future Exchange Commission (CFTC) have taken action in recent weeks.

The SEC charged cryptocurrency banking firm AriseBank over alleged fraud and violations of securities rules on Jan. 25, announcing a cease-and-desist order on firm’s operations.

Around the same time, the CFTC sued crypto scheme My Big Coin for alleged fraud, and brought two lawsuits against allegedly fraudulent cryptocurrency investment schemes just a week before.

Source: https://www.coindesk.com/australian-watchdog-recei...
February 19, 2018
Telegram ICO: Scam Among Cryptocurrency Scams
Looking for the center of the action in cryptocurrency today? Bitcoin is so passé - the big money is now in Initial Coin Offerings (ICOs).

Part investment security (although they’re not), part 'altcoin' token with true utility (although there isn’t), ICOs are nevertheless attracting billions of dollars in speculative investment from hundreds of thousands of people with more money than sense.

At the center of this frenzy is one upcoming ICO, whose purported $ 2 billion valuation dwarfs all others — Telegram.

Founded by Russian entrepreneurs Pavel and Nikolai Durov who cashed out of their social media company VKontakte to the tune of $ 300 million, Telegram is a secure messaging app that competes with the like of WhatsApp.

'Compete,' however, is misleading, because Telegram has no viable business model, as it makes no money — on purpose.

In fact, Pavel Durov covers all its expenses out of his own pocket. "Pavel Durov, who shares our vision, supplied Telegram with a generous donation, so we have quite enough money for the time being," claims the FAQ on the Telegram web site. "If Telegram runs out, we will introduce non-essential paid options to support the infrastructure and finance developer salaries. But making profits will never be an end-goal for Telegram."

The ICO, therefore, appears to be a mechanism for Telegram to cover its bills. "With growing user base, he would’ve eventually run out of money," explains Gregory Klumov, CEO and Founder of STASIS. "Therefore he opted for an ICO as a mechanism to raise funds without getting outside investors into Telegram’s shareholder capital."

Travis Scher, Vice President of Investments at Digital Currency Group echoes this sentiment. "It really felt like it was one of these start-ups that’s burning through cash and needs a way to bring money in to keep funding their operations," Scher says. "This is how they decided they’re going to do it."

Why All the Excitement?

Given the plethora of secure messaging apps on the market coupled with Telegram’s lack of a business model, one might wonder what all the excitement is about.

Perhaps its extra layers of security and privacy account for the excitement, as it’s become a favored messaging app among the 'crypto elite.' "Telegram is my crypto world," says Woody Levin, Founder and CEO at 3.0 Capital. "It's one of the first things I check in the morning and one of the last things I do at night."

For better or worse, "Telegram users are really at the epicenter of the whole crypto boom," says Ryan Gilbert, Partner at Propel Venture Partners.

Telegram’s combination of rigorous privacy and zero cost is, in fact, its raison d'être. "Secure messaging should be free for everyone. Displaying ads alongside your private communication seems out of place, even immoral," according to Pavel Durov. "We're aiming to set a higher standard for messaging technologies, to raise the bar of communication in terms of speed, security and versatility."

Yet, while privacy appeals to the crypto elite as well as the dissidents and activists that the Durovs intended to support, it is also enabled Telegraph to become a communication tool of choice for terrorists, child pornographers, and other criminals. In fact, the presence of child pornography on the Telecom app caused Apple AAPL -0.35% to pull it from its App Store last week.

Of particular interest to this criminal underbelly are a Telegram feature it calls 'secret chats.' "Secret chats are meant for people who want more secrecy than the average fella," explains the Telegram web site. "All messages in secret chats use end-to-end encryption." The site continues: "On top of this, messages cannot be forwarded from secret chats."

Telegram’s Controversial White Paper

As with all ICOs, Telegram published a white paper delineating its plans for the ICO. While touting world-changing benefits of its tokens (as so many ICOs do), the paper also reveals a lack of depth. "The teams that will win are teams with deep historical context who have been tinkering with consensus mechanisms and scalability for several years. It’s more like science than entrepreneurship," says Nick Tomaino, Founder of 1confirmation. "In my mind, [Telegram doesn’t] have the talent to do that."

Even assuming the Telegram team is up the task the company says it is ready to tackle, there is simply too much money in the deal. "You could see how people would say this one checks all the boxes — amazing team, a market set up for them and a good product," says DCG’s Scher. "[But] the numbers are totally out of whack."

The size of the ICO, in fact, is separating the more seasoned crypto investors from the newbies. "Venture investors with deep domain expertise in the blockchain technology sector and crypto ecosystem are passing," says Bart Stephens, Cofounder and Managing Partner at Blockchain Capital. "Generalist VC firms who feel that they have so far missed the boat on crypto appear to be interested."

While such generalist firms and other newbies are happy to jump on board, the more technically savvy investors are uncomfortable with the technical depth in the white paper.

"The entire thing should have a disclaimer attached: 'all of the technical things we said this will do are completely unproven and have not been subjected to outside scrutiny,'" says Charles Noyes, Quant Researcher/Protocol Analyst at Pantera Capital. "They're promising something that will somehow be radically better than everything else out there, with no real explanation of how that will happen or outside scrutiny of those claims," Noyes continues.

Questions about Telegram’s Homegrown Security

While Telegram touts rigorous security, both within its existing messaging app as well as for the plans it lays out in its white paper, some people have doubts.

At issue: Telegram created its own MTProto security protocol, which hasn’t had the same kind of trial by fire that other protocols have had to face. "They use the MTProto protocol which is effectively homegrown and I’ve seen no proper proofs of its security," warns Alan Woodward, Member of the Advisory Board at the Kent Interdisciplinary Research Centre in Cybersecurity at the University of Kent and Professor at the University of Surrey. "At present we don’t know enough to know if it’s secure or insecure. That’s the trouble with security by obscurity." Woodward continues: "Unless you have considerable experience, you shouldn’t write your own crypto. No one really understands why they did that."

The Telegram FAQ admits the protocol is home-grown. "We are based on the MTProto protocol," the FAQ explains, "built upon time-tested algorithms to make security compatible with high-speed delivery and reliability on weak connections. We are continuously working with the community to improve the security of our protocol and clients."

In fact, it didn’t take long for a student to poke holes in Telegram’s security approach. "I've discovered Telegram obfuscates its traffic by re-encrypting everything with a prepended key. When I’ve prompted the Telegram Security team for comments, they responded that this measure is used to 'counter some of the less sophisticated attempts at banning our service in certain countries,'" explains Tomáš Sušánka, Student and Developer at SatoshiLabs.

Sušánka continues: "The obfuscation method is not officially documented, which makes sense if Telegram uses it to circumvent censorship. However, the reality of its functionality is doubtful at best. A more conventional approach would be much appreciated, such as the usage of SSL/TLS [a common, hardened protocol]."

Scams Upon Scams

If questions about Telegram’s motivations, the maturity of its team, and the practicality of its plans weren’t enough, we’d still have to navigate a minefield of scams that have popped up around Telegram’s pending ICO.

In fact, numerous web sites, including gramtoken. io, tgram. cc, ton-ico.com, ton-gram.io, grampreico.com, tgram. cc, gramtoken. tech and others have arisen, collected perhaps tens of thousands of dollars or more in Bitcoin and Ether, only to disappear from the web (although some may still be online).

Each of these sites claims to be giving investors a back door into the upcoming Telegram ICO, and one — gramtoken. io — purportedly collected more than $ 5 million before going dark, according to TechCrunch.

For its part, Telegram is fanning this fire with a private, pre-ICO round selling 'allocations' - essentially, futures contracts on tokens that will be available post-ICO. These allocations have themselves generated a booming derivatives market themselves, as people have been flipping them for immense profits.

This craziness is causing even risk-tolerant crypto experts to give pause. "Telegram is definitely much more crazy than some of the bigger ICOs we have seen," says Siddharth Kalla, Cofounder of the Turing Advisory Group.

Michael Jackson of Mangrove Capital Partners echoes this sentiment. "It's an interesting case—but only for the brave. As in, very, very, brave," Jackson says. "It makes normal crypto look blue-chip."

Haven’t made up your mind about Telegram yet? Here are the opinions of a few more experts. "Their limited partners are calling them saying, 'What are you doing? This is the biggest airball in venture history,'" warns Spencer Bogart, Partner at Blockchain Capital. "It was an absurd valuation for something that’s effectively field stage."

We’ll let Carlos Mosquera Benatuil, General Partner at Solidus Capital have the final word. "The supposed adults in the room are getting into these ridiculous deals, getting their chips in just in case," Mosquera says. "It's casino money."

Source: https://www.forbes.com/sites/jasonbloomberg/2018/0…
February 18, 2018
Telegram ICO: Scam Among Cryptocurrency Scams
Looking for the center of the action in cryptocurrency today? Bitcoin is so passé - the big money is now in Initial Coin Offerings (ICOs).

Part investment security (although they’re not), part 'altcoin' token with true utility (although there isn’t), ICOs are nevertheless attracting billions of dollars in speculative investment from hundreds of thousands of people with more money than sense.

At the center of this frenzy is one upcoming ICO, whose purported $ 2 billion valuation dwarfs all others — Telegram.

Founded by Russian entrepreneurs Pavel and Nikolai Durov who cashed out of their social media company VKontakte to the tune of $ 300 million, Telegram is a secure messaging app that competes with the like of WhatsApp.

'Compete,' however, is misleading, because Telegram has no viable business model, as it makes no money — on purpose.

In fact, Pavel Durov covers all its expenses out of his own pocket. "Pavel Durov, who shares our vision, supplied Telegram with a generous donation, so we have quite enough money for the time being," claims the FAQ on the Telegram web site. "If Telegram runs out, we will introduce non-essential paid options to support the infrastructure and finance developer salaries. But making profits will never be an end-goal for Telegram."

The ICO, therefore, appears to be a mechanism for Telegram to cover its bills. "With growing user base, he would’ve eventually run out of money," explains Gregory Klumov, CEO and Founder of STASIS. "Therefore he opted for an ICO as a mechanism to raise funds without getting outside investors into Telegram’s shareholder capital."

Travis Scher, Vice President of Investments at Digital Currency Group echoes this sentiment. "It really felt like it was one of these start-ups that’s burning through cash and needs a way to bring money in to keep funding their operations," Scher says. "This is how they decided they’re going to do it."

Why All the Excitement?

Given the plethora of secure messaging apps on the market coupled with Telegram’s lack of a business model, one might wonder what all the excitement is about.

Perhaps its extra layers of security and privacy account for the excitement, as it’s become a favored messaging app among the 'crypto elite.' "Telegram is my crypto world," says Woody Levin, Founder and CEO at 3.0 Capital. "It's one of the first things I check in the morning and one of the last things I do at night."

For better or worse, "Telegram users are really at the epicenter of the whole crypto boom," says Ryan Gilbert, Partner at Propel Venture Partners.

Telegram’s combination of rigorous privacy and zero cost is, in fact, its raison d'être. "Secure messaging should be free for everyone. Displaying ads alongside your private communication seems out of place, even immoral," according to Pavel Durov. "We're aiming to set a higher standard for messaging technologies, to raise the bar of communication in terms of speed, security and versatility."

Yet, while privacy appeals to the crypto elite as well as the dissidents and activists that the Durovs intended to support, it is also enabled Telegraph to become a communication tool of choice for terrorists, child pornographers, and other criminals. In fact, the presence of child pornography on the Telecom app caused Apple AAPL -0.35% to pull it from its App Store last week.

Of particular interest to this criminal underbelly are a Telegram feature it calls 'secret chats.' "Secret chats are meant for people who want more secrecy than the average fella," explains the Telegram web site. "All messages in secret chats use end-to-end encryption." The site continues: "On top of this, messages cannot be forwarded from secret chats."

Telegram’s Controversial White Paper

As with all ICOs, Telegram published a white paper delineating its plans for the ICO. While touting world-changing benefits of its tokens (as so many ICOs do), the paper also reveals a lack of depth. "The teams that will win are teams with deep historical context who have been tinkering with consensus mechanisms and scalability for several years. It’s more like science than entrepreneurship," says Nick Tomaino, Founder of 1confirmation. "In my mind, [Telegram doesn’t] have the talent to do that."

Even assuming the Telegram team is up the task the company says it is ready to tackle, there is simply too much money in the deal. "You could see how people would say this one checks all the boxes — amazing team, a market set up for them and a good product," says DCG’s Scher. "[But] the numbers are totally out of whack."

The size of the ICO, in fact, is separating the more seasoned crypto investors from the newbies. "Venture investors with deep domain expertise in the blockchain technology sector and crypto ecosystem are passing," says Bart Stephens, Cofounder and Managing Partner at Blockchain Capital. "Generalist VC firms who feel that they have so far missed the boat on crypto appear to be interested."

While such generalist firms and other newbies are happy to jump on board, the more technically savvy investors are uncomfortable with the technical depth in the white paper.

"The entire thing should have a disclaimer attached: 'all of the technical things we said this will do are completely unproven and have not been subjected to outside scrutiny,'" says Charles Noyes, Quant Researcher/Protocol Analyst at Pantera Capital. "They're promising something that will somehow be radically better than everything else out there, with no real explanation of how that will happen or outside scrutiny of those claims," Noyes continues.

Questions about Telegram’s Homegrown Security

While Telegram touts rigorous security, both within its existing messaging app as well as for the plans it lays out in its white paper, some people have doubts.

At issue: Telegram created its own MTProto security protocol, which hasn’t had the same kind of trial by fire that other protocols have had to face. "They use the MTProto protocol which is effectively homegrown and I’ve seen no proper proofs of its security," warns Alan Woodward, Member of the Advisory Board at the Kent Interdisciplinary Research Centre in Cybersecurity at the University of Kent and Professor at the University of Surrey. "At present we don’t know enough to know if it’s secure or insecure. That’s the trouble with security by obscurity." Woodward continues: "Unless you have considerable experience, you shouldn’t write your own crypto. No one really understands why they did that."

The Telegram FAQ admits the protocol is home-grown. "We are based on the MTProto protocol," the FAQ explains, "built upon time-tested algorithms to make security compatible with high-speed delivery and reliability on weak connections. We are continuously working with the community to improve the security of our protocol and clients."

In fact, it didn’t take long for a student to poke holes in Telegram’s security approach. "I've discovered Telegram obfuscates its traffic by re-encrypting everything with a prepended key. When I’ve prompted the Telegram Security team for comments, they responded that this measure is used to 'counter some of the less sophisticated attempts at banning our service in certain countries,'" explains Tomáš Sušánka, Student and Developer at SatoshiLabs.

Sušánka continues: "The obfuscation method is not officially documented, which makes sense if Telegram uses it to circumvent censorship. However, the reality of its functionality is doubtful at best. A more conventional approach would be much appreciated, such as the usage of SSL/TLS [a common, hardened protocol]."

Scams Upon Scams

If questions about Telegram’s motivations, the maturity of its team, and the practicality of its plans weren’t enough, we’d still have to navigate a minefield of scams that have popped up around Telegram’s pending ICO.

In fact, numerous web sites, including gramtoken. io, tgram. cc, ton-ico.com, ton-gram.io, grampreico.com, tgram. cc, gramtoken. tech and others have arisen, collected perhaps tens of thousands of dollars or more in Bitcoin and Ether, only to disappear from the web (although some may still be online).

Each of these sites claims to be giving investors a back door into the upcoming Telegram ICO, and one — gramtoken. io — purportedly collected more than $ 5 million before going dark, according to TechCrunch.

For its part, Telegram is fanning this fire with a private, pre-ICO round selling 'allocations' - essentially, futures contracts on tokens that will be available post-ICO. These allocations have themselves generated a booming derivatives market themselves, as people have been flipping them for immense profits.

This craziness is causing even risk-tolerant crypto experts to give pause. "Telegram is definitely much more crazy than some of the bigger ICOs we have seen," says Siddharth Kalla, Cofounder of the Turing Advisory Group.

Michael Jackson of Mangrove Capital Partners echoes this sentiment. "It's an interesting case—but only for the brave. As in, very, very, brave," Jackson says. "It makes normal crypto look blue-chip."

Haven’t made up your mind about Telegram yet? Here are the opinions of a few more experts. "Their limited partners are calling them saying, 'What are you doing? This is the biggest airball in venture history,'" warns Spencer Bogart, Partner at Blockchain Capital. "It was an absurd valuation for something that’s effectively field stage."

We’ll let Carlos Mosquera Benatuil, General Partner at Solidus Capital have the final word. "The supposed adults in the room are getting into these ridiculous deals, getting their chips in just in case," Mosquera says. "It's casino money."

Source: https://www.forbes.com/sites/jasonbloomberg/2018/0…
February 17, 2018
SEC suspends trading in three crypto and blockchain companies after questionable statements
The fight against cryptocurrency and blockchain fraud continues…

The U.S. Securities and Exchange Commission today announced it has suspended trading in three companies amid questions surrounding similar statements they made about the acquisition of cryptocurrency and blockchain technology-related assets.

The SEC’s trading suspension orders state that recent press releases issued by Cherubim Interests Inc (OTCMKTS:CHIT), PDX PARTNERS INC (OTCMKTS:PDXP), and Victura Construction Group Inc. (VICT) claimed that CHIT, PDXP, and VICT acquired AAA-rated assets from a subsidiary of a private equity investor in cryptocurrency and blockchain technology among other things.

According to the SEC order regarding CHIT, it also announced the execution of a financing commitment to launch an initial coin offering.

According to the SEC’s orders, there are questions regarding the nature of the companies' business operations and the value of their assets, including in press releases issued beginning in early January 2018. Additionally, the Commission suspended trading in the securities of CHIT because of its delinquency in filing annual and quarterly reports.

In August 2017, the SEC warned investors to be on alert for companies that may publicly announce ICO or coin/token related events to affect the price of the company’s common stock.

According to Michele Wein Layne, Director of the Los Angeles Regional Office,

This is a reminder that investors should give heightened scrutiny to penny stock companies that have switched their focus to the latest business trend, such as cryptocurrency, blockchain technology, or initial coin offerings.

Under U.S. federal securities laws, the SEC can suspend trading in a stock for 10 days and generally prohibit a broker-dealer from soliciting investors to buy or sell the stock again until certain reporting requirements are met.

Source: https://www.leaprate.com/cryptocurrency/scam/suspe…
February 16, 2018
Clearify: Scam Address Library Growing by Over 100 Addresses Per Day
Last weekend’s LoopX fiasco, where the team behind the fraudulent ICO walked off with almost $ 5m according to some estimates, was simply the latest entry in a long list of scams that have dogged the ICO space.

For the first time, however, it appears that it might now be possible to place some quantitative estimates on the sheer scale of the phenomenon.

Clearify, an Australian-based cryptocurrency address verification service, has released some initial estimates after conducting a review of the number of scam addresses appearing on social networks in real-time.

Most Scam Attempts End in Failure

"We began building the library of scam and/or suspect addresses that drives our Scam Flagging System one week ago," stated project representative Dale Drury, "and at the moment we are currently flagging just over one hundred suspect addresses per day, on average."

Scam contribution addresses appearing on Twitter are thought to have numbered over 150 for the last two days alone. The problem, then, appears to be something more of an epidemic rather than an occasional scourge.

"On the bright side," states Drury, "most of these addresses currently have no funds in their wallet which is a positive sign of sorts." A likely sign, perhaps, that most scam attempts are ending in failure and which itself may be indicative of an increasing awareness among ICO investors of the need for due diligence.

However, the relative ease of the LoopX scam — whose project team remained entirely anonymous and who provided a white-paper lacking in any substance — may suggest that many investors are still not asking basic questions.

Some scam addresses in the Clearify Scam Address Library are being flagged by the Clearify team itself, others are being flagged by individuals reporting suspect addresses to them.

Right now most suspect addresses are being flagged by the Clearify team. With increased awareness of the new service, however, the team is hoping that collective community vigilance will eventually allow them to build a near-comprehensive library updated in real-time of all currently ongoing scam operations.

Readers who come across suspect addresses can flag these using the Clearify platform’s submission form. Users can also check to see if a given contribution address has been flagged as suspect or verified as safe on the platform’s home page.

With most ICOs currently thought not to be subscribed to an address verification service, and with an absence of formal regulatory compliance frameworks almost everywhere for ICOs, community collaboration and pressure appear to remain the most promising avenues for combatting the issue.

Source: https://www.icoexaminer.com/ico-news/clearify-scam…

February 16, 2018
Skycoin: Anatomy of a cryptocurrency scam
What if someone told you there was a cryptocurrency that could help you fight the repeal of net neutrality by getting paid to be on a badass futuristic internet? Furthermore it’s uncensorable, can’t be centralized, and is impenetrable to hacks.

Enter Skycoin, the sounds-to-good-to-be-true coin with so many problems its likelihood of being a scam is somewhere between "probably" and "even more probably."

On the one-hand, it meets all the requirements for a legit cryptocurrency. It’s got a nice website, a whitepaper that passes a novice glance, and a positive community presence (perhaps a little too positive, which is explained by this bounty program). Plus it’s been around since 2012 making it old AF in the crypto world.

But why does Altcoins.com list it as a scamcoin due to pre-mining? And, as blogger Ilya pointed out, its whitepapers don’t make sense.

Read the whole article: https://thenextweb.com/hardfork/2018/02/15/anatomy…

February 15, 2018
European authorities investigate Austrian Bitcoin scam
Austrian authorities are asking Interpol to help them track down suspects in an alleged Bitcoin scam that blew up last year and may have hit hundreds of investors in the country and abroad.

The prosecutors' office in Vienna is consolidating "hundreds of complaints" about a scheme known as "Optioment" that have been filed at police stations across the country, and which add to a warning by financial watchdog FMA, spokeswoman Christina Ratz said by telephone. Die Presse earlier reported that the total number of victims could exceed 10,000 and that as many as 12,000 Bitcoins ($ 115 million) may have been lost.

Federal police identified two people in Austria who are accused of fraud in the complaints, and are seeking to identify several others, including some abroad, Ratz said. Austrian police asked the Interpol agency to investigate additional suspects in Denmark, Latvia and Germany. She declined to identify the suspects. No arrests have been made.

Optioment ran a website that’s now offline, and it held events attended by as many as 700 retail investors in Austria, Die Presse reported today. The scheme promised returns of as much as 4 percent a week for deposited Bitcoins, and it rewarded investors who attracted new users to the system, the newspaper said, citing internal documents, videos from investor events, and interviews with members of the scheme.

Costa Rica

Optioment told investors it was a "private Costa Rica-based Bitcoin fund," according to a copy of its website hosted by the Internet Archive. It promised outsized returns through arbitrage trading.

Die Presse said the "multi-level marketing" may have broadened the investor population into Poland, Romania and the former Yugoslavia. Prosecutors also have hints suggesting German investors may have been affected, Ratz said.

Optioment initially offered redemptions until stopping around November, Die Presse said. The FMA watchdog reported the scheme to the prosecutors at the end of January, because it suspected it to be fraudulent or a pyramid scheme, spokesman Klaus Grubelnik said.

Source: https://mybroadband.co.za/news/cryptocurrency/2488…
February 15, 2018
Cryptocurrency startup LoopX pulls exit scam after raising $ 4.5M in ICO
Another day, another exit scam: an emerging cryptocurrency startup more commonly known as LoopX has suddenly vanished out of thin air along with millions worth of its investors' savings.

The sketchy investment platform, which promised to earn backers' money with its proprietary trading algorithm, has abruptly gone dark after raising $ 4.5 million in a series of initial coin offerings (ICO). The company has since also pulled its website and deleted its social media fingerprint, including Facebook, Twitter, YouTube, and Telegram accounts.

The only remainder from LoopX is a still active BitcoinTalk thread from December last year — that and its entries on ICO review services ICOBench and TokenDesk.

Source: https://thenextweb.com/hardfork/2018/02/12/cryptoc…

February 7, 2018
Bitcoin scammers are impersonating Elon Musk and Donald Trump on Twitter to steal cryptocurrency
The cybercrooks use fake celebrity social media accounts to dupe people into sending small cryptocurrency donations in return of a chance of being sent thousands back.

Scammers are pretending to be verified users on Twitter, such as Elon Musk, to steal Bitcoin.

It’s a classic online scam that echoes back to the days of those emails from farcical Nigerian princes, who would beg for a small amount of cash and promise multi-millions in return.

They may seem obviously fake, but today’s savvy fraudsters have already reportedly raked in thousands of Bitcoin within less than a week, according to Wired.

The new scam, which first started growing traction on February 1, sees fraudsters set up Twitter handles that closely mimic verified accounts of well-known figures.

So far, they’ve included Tesla founder Elon Musk, software company tycoon John McAfee and Ethereum cofounder Vitalik Buterin.

Source: https://www.wired.com/story/classic-scam-steals-bi…
January 29, 2018
Cryptocurrency Scam Site Disappears, Leaving Only the Word 'Penis' Behind
A short-lived and relatively unknown cryptocurrency project built on Ethereum called Prodeum disappeared this weekend—along with the money a small number of hapless investors sunk into it. All that remained of its website was a white page with the word "penis" written on it.
Source: https://gizmodo.com/cryptocurrency-scam-site-disap…
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