Fraud Risk Assessment: BitClub Network

BitClub Network
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  • BitClub Network
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  • Last modified: December 7, 2017
  • Legitimacy
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BitClub Network ( was launched in July 2014 providing Bitcoin cloud mining services from Iceland. 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.

Phantom Richesexclamation_warningAdvertising itself as "the most lucrative way to earn digital currency".
Source Credibilityflag-iconBitClub tries to win people over with claims that it is working with a "team of experts" even though it never becomes clear who these experts may be (if they exist at all). This line is further emphasized by an accompanying picture of a professional looking team, which is evidently taken from another website (from before BitClub was even launched).
Social Proofflag-iconBitClub features several testimonials, one of which was accompanied by the picture of convicted rapist Ali Ansari (sentenced to life in prison in 2013). Likewise, looking up other featured images also leads to different persons in different locations than the ones mentioned.
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 Addressthumb-up-iconBitClubPool
Pictures of Mining Equipmentthumb-up-iconYes
Secretive or Complex Equipmentflag-iconDespite the pictures and videos, it is not possible to identify what hardware BitClub is using. A description is not provided either. Interestingly the FAQ does have a section dedicated to the (not so common) question whether BitClub is a Ponzi scheme, in which it states "NO! A ponzi scheme has no product" without subsequently going deeper into BitClub's equipment.
Website Availablethumb-up-iconYes
Website Registration Detailsthumb-up-iconRegistered July 2014, for a period of six years.
Website Designflag-iconTerms of use are not present, while the website also includes non-original content in multiple locations (see "source credibility" and "social proof").
Grammar on Websitethumb-up-iconGood
Payments Optionsexclamation_warningBitcoin only
Service Disruptions & Unbusinesslike Conductflag-iconThe missing terms and conditions result in no legal basis for doing business. Furthermore the company clearly does not like paying out, as it forces a minimum of 30% (even 50% for small users) of daily earnings to be reinvested. In fact, the FAQ even states that BitClub's "business model requires re-purchases". Coincidentally, so do Ponzi schemes.
Contact Informationflag-iconContact information is missing (both address and telephone number).
Verified Addressflag-iconWhois data is hidden, while the website only states that the mining facility is located in Iceland while the main server is in The Netherlands. The local company directories were consulted, but this did not provide any useful information either (see "business registration"). Hence no address could be confirmed.
Verified Ownerflag-icon"BitClub is not owned by any single person or entity" according to the website, but none are explicitly mentioned anywhere. In fact, the owner is actively hiding his identity; see "verified address".
Business Registrationflag-iconThe Icelandic and Dutch company directories do not include a business named "BitClub".
Independent Auditsexclamation_warningNone
Total Flags: 10 (3 Warnings = 1 Flag)

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.

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”.

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.

Comments (7)

  1. Garsone ForReal August 26, 2016
    • Digiconomist August 27, 2016
    • Carlos March 19, 2018
      • Bitgrlkhris October 7, 2018
  2. Tim Thaler October 22, 2018
  3. justin cleveland December 10, 2019
    • ANNE BENN February 13, 2020

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