Fraud Risk Assessment: Bitminer

Bitminer
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  • Rated 1 stars
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  • Bitminer
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  • Last modified: January 27, 2016
  • Legitimacy
    Editor: 1%

Bitminer (bitminer.eu) was launched in November 2015 providing Bitcoin cloud mining services from the United Kingdom. The company’s legitimacy has been evaluated based on the items listed below. Every individual item has been checked for the presence of obvious red flags or warning signals. If these are present, an explanation detailing what triggered them has been included. A detailed description of the reasons to evaluate each of the included items can be found below the table.

Persuasion
Total Flags: 8 (3 Warnings = 1 Flag)
Phantom Richesthumb-up-iconN/A
Scarcitythumb-up-iconN/A
Source Credibilitythumb-up-iconN/A
Social Proofexclamation_warningBitminer has a rather high paying referral program that offers 1 GH/s free for every $5 spent by referrals. This translates to about 5% commission at current rates.
Reciprocitythumb-up-iconN/A
Products
Guaranteed Returnthumb-up-iconN/A
High Return / Low Riskthumb-up-iconN/A
Overly Consistent, Positive Returnsthumb-up-iconN/A
External Risk Insurancethumb-up-iconN/A
Hardware Equipment
Public Mining Addressflag-iconNo
Pictures of Mining Equipmentthumb-up-iconThe website features multiple pictures of the "mining farm", but if the promotional video proves one thing it's that editing images isn't a problem for the owner.
Secretive or Complex Equipmentthumb-up-iconThe equipment mainly consists of the Antminer S7 with PSU
Service
Website Availablethumb-up-iconYes
Website Registration Detailsexclamation_warningBitminer.eu is a newly registered website, with its registration in November 2015
Website Designexclamation_warningBitminer put more effort into its promotional video than its website. The logo looks amateurish, and white text is sometimes featured on a white background. Sloppy.
Grammar on Websiteexclamation_warningWith sentences such as "A detailed maintenance fee rate are available in members dashboard after login, and will be deducted daily from your payout" it is clear that the owner isn't proficient in English.
Payments Optionsexclamation_warningCryptocurrency only
Service Disruptions & Unbusinesslike Conductflag-iconWhen logged in the website asks the users the following: "Help us to lower the costs of maintenance, clicking this banner 1 time a day. In this way we can further lower costs and improve service." For any advertiser this will violate the terms and conditions, making it highly unusual.

The terms and conditions at Bitminer itself are also lacking in the sense that certain sections can easily be found on older websites, indicating they have simply been copied (the quality of the text is also better than that on the rest of the website). Terms and conditions are the legal basis for doing business, so a legitimate business wouldn't just copy these.
Contact Informationflag-iconBitminer is actively hiding its information (see next section).
Business
Verified Addressflag-iconThe given address (20-22 Wenlock Road) isn't a real office address, see "Business Registration" below.
Verified Ownerflag-iconThe website's WHOIS information is hidden, but it mentions "Roger V." as the company's CEO (the contact email also happens to be "[email protected]"). The problem with this is that the registration at the UK's company register lists "Giacomo Bugini" as the one and only CEO. At least one, or perhaps both names, are therefore false. The documents show Giacomo is from Italy, which would explain the accent of the CEO in the promotional video. There's, however, no guarantee that Giacomo is the Italian's real name.
Business Registrationflag-iconBitminer is registered with company number 09951039 via companiesmadesimple.com according to the filling history. This service provides privacy office addresses as stated:

"Company Formation MadeSimple provides a London based registered office for limited companies at:

20-22 Wenlock Road, London, N1 7GU

Using this service your company will be registered at our address and we will forward on all your company’s official government mail."


Bitminer uses this service to get an address in the UK, but given its nature it's meaningless as its not a real address. Anyone in the world can register in the UK this way. In turn, this renders the complete registration meaningless as it doesn't prove anything.
Independent Auditsexclamation_warningNone

Note that items with a warning instead of a flag indicate that these could occur at a legitimate company. For example, legitimate companies will normally try to persuade you into buying their products. Multiple warnings will, however, still trigger a flag. A description for the listed items is provided below. This list is meant to assist with identifying obvious scams, and therefore does not provide any guarantees that a company is truly legitimate.

Phantom Riches
The most common tactic used by fraudsters is called “phantom riches”. By dangling the prospect of wealth such as “big payoffs”, the scam artist tries to get you to stop thinking logically.

Scarcity
Using the fear of missing out, fraudsters create a false sense of urgency with statements such as “last chance” or “only so few available”. This causes people to agree hastily, before even having the opportunity to think about what they’re doing.

Source Credibility
Persuasion is more likely when the source presents itself as being credible, expert and trustworthy. Common tactics used by scammers to make themselves look legitimate include using fake websites or hacked emails and pretending to be someone they are not. Alternatively, sources can also be external with claims such as “Warren Buffet has already invested in this”.

Social Proof
Fraudsters take advantage of herd behavior by creating the illusion of consensus or social proof that the investment is legitimate with claims that “everybody is already doing it”, or referral programs in which members encourage their friends and associates to invest as well. This automatically triggers something in the head that says: “if everybody [or someone from the inner circle] wants it, it must be good”.

Reciprocity
A business is likely to receive far more of our trust when it provides a lot of free value, because of the rule of reciprocity which causes us to tend to feel obligated to return favors after people do favors for us

Guaranteed Return
All investments carry some degree of risk, so a guaranteed profit is a clear red flag. A valid question would be why an organization would try to sell such a scheme instead of using it to get rich themselves.

High Return / Low Risk
Like a guaranteed return, a high return / low risk investment opportunity also defies the common risk-return relationship. The best advice is an old one: “if it sounds too good to be true, it probably is”.

Overly Consistent, Positive Returns
Cryptocurrency markets are among the most volatile markets, hence the performance of any related product or service is also expected to fluctuate.

External Risk Insurance
The fraudster may present some external risk insurance for the investment in order to add to its credibility. In reality, insurance is only seldom acquired and guarantees typically lack substance. Dummy companies are often used to act as the guarantor or insurer.

Public Mining Address
A cloud mining company must have a public cryptocurrency address in order to participate in the mining process. There is no reason for a legitimate company not to disclose this.

Pictures of Mining Equipment
Cloud Mining companies should be able to provide some pictures of the products they are selling besides any textual descriptions.

Secretive or Complex Equipment
Even in the world of cryptocurrencies one should be skeptical about special competitive advantages without any proper disclosure, or when the information is incomprehensible or incomplete. Too often only the positive elements are accentuated.

Website Available
Considering the importance of  domains and websites in the internet age, there is almost no reason for a legit company not to have one.

Website Registration Details
Very few scam websites survive longer than one year, so domains are generally registered for just one year unless otherwise required for the specific domain. For the same reason, websites created less than one year ago should be considered suspicious.

Website Design
Amateurish, cluttered and disorganized websites can point to a scam as many scam sites use text and images from legit websites and other sources which may not work together very well.

Grammar on Website
Many scammers have limited English proficiency.

Payments Options
Even though cryptocurrency payment options are logical for a cryptocurrency company, it is also very convenient for scammers as the recipient essentially remains anonymous. The same goes for services such as Western Union and Moneygram. Hence a lack of alternative payment options should still be considered a warning signal.

Service Disruptions &  Unbusinesslike Conduct
Especially Ponzi scheme promotors will encourage participants to “roll over” their investment. These schemes are not very fond of investors cashing out, which may lead to difficulties receiving payments and a non-responsive or difficult to reach customer service.

Contact Information
Legitimate companies have very little reason not to list their contact information.

Business Verification
First, you should never hand your hard-earned money over without knowing where it is going. Second, you should do a background check to avoid handing it to a known scammer. Be weary of people without an online identity. Scammers will typically try to hide their identity or conceal their true identity to avoid being easily discovered.

Independent Audits
Audits certainly do not root out every instance of fraud, but auditors do have a responsibility to detect errors or fraud in the company’s financial statements.