Fraud Risk Assessment: 1HashMining

1HashMining
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  • Rated 1 stars
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  • 1HashMining
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  • Last modified: January 21, 2017
  • Legitimacy
    Editor: 1%

1HashMining (1hashmining.com) was launched in December 2016 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: 15 (3 Warnings = 1 Flag)
Phantom Richesflag-icon1HashMining presents itself as a "known for the best return on investment"
Scarcitythumb-up-iconN/A
Source Credibilityflag-iconThe company shows a picture of its team on the website, but this photo belongs to a patent attorney office.
Social Proofflag-iconSeveral testimonials are featured, but the images of the people can easily be found on shutterstock (like this one).
Reciprocitythumb-up-iconN/A
Products
Guaranteed Returnthumb-up-iconN/A
High Return / Low Riskflag-iconThe investment plans return an unrealistic and unsustainable annual rate of return of at least 600%.
Overly Consistent, Positive Returnsflag-iconPayouts are perfectly stable and positive, not affected by changes in price or mining difficulty.
Downplaying Risksflag-iconThe company explicitly states it "offers safe investments"
Hardware Equipment
Public Mining Addressflag-iconNo
Pictures of Mining Equipmentflag-iconThe website features an image of mining equipment, but the image belongs to Genesis Mining. This one is clearly fake.
Secretive or Complex Equipmentflag-iconThe website doesn't explain what the company does other than "Bitcoin mining".
Service
Website Availablethumb-up-iconYes
Website Registration Detailsexclamation_warningRegistered October 2016
Website Designflag-iconThe website is featuring a load of fake images (see Source Credibility, Social Proof and Pictures of Mining Equipment). This is a very poor attempt at making a credible website.
Grammar on Websitethumb-up-iconGood
Payments Optionsexclamation_warningBitcoin only
Service Disruptions & Unbusinesslike Conductflag-iconThe company failed to register (see Business Registration), and the website makes clear that it isn't a real business (see Website Design)
Contact Informationthumb-up-iconThe given address is:

77A Southgate Road
London N1 3JS, United Kingdom
Business
Verified Addressflag-iconThe address could not be verified (see Business Registration)
Verified Ownerflag-iconThe owner's name is unknown. A business registration could not be found and the website registration information is hidden.
Business Registrationflag-iconThe company name could not be found in the public UK business register
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.

Downplaying Risks
The fraudster will do anything to provide a false sense of security, such as presenting some form of external risk insurance for the investment. In reality, insurance is only seldom acquired and guarantees typically lack substance. Dummy companies are often used to act as the guarantor or insurer. Other actions may include misrepresenting, or even non-disclosure of risks involved.

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.

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