Just yesterday, CCN exposed LSM Labs, a blatantly obvious scam. The so-called “world class semiconductor engineering company which manufactures leading edge Bitcoin ASIC processors and systems” used various shady practices to promote itself, including buying fake reviews on Bitcointalk and contributing several “articles” (that were really just advertisements for LSM) to various Bitcoin news sites. A few hours after CCN’s reveal, LSM Labs quickly took down their website without warning.
It might be tempting to celebrate this victory. After all, CCN just saved a lot of people from Let’s Scam Millions Labs. But the problem is, Bitcoin scams are a dime a dozen, and taking down LSM Labs is just one small step in exposing the corruption in this industry.
[dropcap size=small]B[/dropcap]itcoin favours privacy and anonymity, which is both one of its greatest strengths and weaknesses. It’s great that the system allows users to maintain their privacy, a basic human right, but unfortunately, this can be abused by scammers. There’s a pretty comprehensive list of Bitcoin-related heists, thefts, hacks, and scams on Bitcointalk. Notice that in most cases, the perpetrator was never caught. Some of these incidents really stand out, such as the Inputs.io hack, where approximately 4100 bitcoins were stolen from the now-dead online bitcoin wallet provider. Many Bitcoiners have claimed that the hack was an inside job, and looking back at the details, these accusations seem valid. The site was run by “TradeFortress”, whose real identity remains unknown. TradeFortress has been accused of being a scammer in the past, yet hundreds of users stored their bitcoins with him. Unfortunately, what’s done is done, and there’s not much that can be done about these scams now. However, Bitcoiners can do their best to prevent these types of incidents in the future.
People are still throwing money at a lot of Bitcoin-related companies that are just short of being confirmed scams. Take Butterfly Labs for example. The company has consistently failed to deliver its customers’ purchases on time and now faces legal issues over fraud and negligence. Furthermore, the company’s business conduct is completely unacceptable.
Then there’s KnCMiner, a newer company that also fails to keep its promises. KnC recently shipped customers’ orders completely broken and unusable. Customers who have received working orders have reported poor packaging and construction. Furthermore, KnC’s machines could even be too dangerous to use, as many customers are reporting. These are just two examples, but there are countless others, and it would probably be easier to list the legitimate companies than listing all the disreputable ones (CCN’s mining expert Scott Fargo can vouch for Spondoolies and Bitmain). Most of the times, spotting these scams is just a matter of common sense. If a company isn’t being particularly transparent, routinely fails to keep its word, or is offering something that’s just too good to be true, it’s probably best to stay away.
These types of scams slow down Bitcoin’s success. Exposing these frauds for what they are before it’s too late is the best course of action.
Last modified: May 18, 2014 13:03 UTC