Fraud Risk Assessment: BitWealth

BitWeath
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  • Last modified: March 11, 2016
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BitWealth (bitwealth.net) was launched in February 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-iconInvestors are lured with promises of 12% daily returns for 12 days.
Scarcitythumb-up-iconN/A
Source Credibilityexclamation_warningBitWealth tries to boost credibility by claiming that it "is one of the largest crypto mining companies in Great Britain".
Social Proofexclamation_warningThere is a 5 percent commission referral program, intended to get users to convince friends and relatives to invest as well.
Reciprocitythumb-up-iconN/A
Products
Guaranteed Returnflag-icon"Our clients can become participants of the investment project and get guaranteed income" according to the FAQ.
High Return / Low Riskflag-iconThe investment plan returns a net profit of 44% after 12 business days. Investing the same amount each time, this would yield an absurdly high return of more than 900% per year. If profits are reinvested as well, this would add up to 150,000% per year. This is unsustainable, and implies this scam will be shortlived.
Overly Consistent, Positive Returnsflag-iconThere is only one available investment plan which offers a constant earning percentage regardless of any external variable such as price volatility.
Downplaying Risksflag-iconMultiple statements are aimed at downplaying risks, including: "your profit will be stable and secure", "you'll be guaranteed to receive a daily income" and "In the case of force majeure situation all company's investors can expect to receive money back minus the profits they received earlier".
Hardware Equipment
Public Mining Addressflag-iconNo
Pictures of Mining Equipmentflag-iconNone
Secretive or Complex Equipmentflag-iconIt is not very clear what BitWealth does. It is involved in "crypto mining and trading with cryptocurrency" using "powerful ASIC equipment and combine classical algorithms". This is extremely vague at best, and likely used to cloak the absence of any real equipment.
Service
Website Availablethumb-up-iconYes
Website Registration Detailsexclamation_warningBitWealth.net is a newly registered website, with its registration date on February 1, 2016.
Website Designflag-iconThe terms and conditions are identical to at least those on BitKingdom, indicating BitWealth was built using stolen content.
Grammar on Websiteexclamation_warningThe text on BitWealth is hardly readable (except for when its stolen content). One example out of many: "BitWealth Limited proposes the risk-free activity. However, to avoid possible loss the company is constantly update contingency fund."
Payments Optionsexclamation_warningCryptocurrency only, leaving the recipient with sufficient anonymity.
Service Disruptions & Unbusinesslike Conductflag-iconThe lack of any real terms and conditions (see Website Design) result a limited legal basis for doing business.
Contact Informationexclamation_warningThe contact information is not being hidden, but could not be confirmed either (see Business Registration)
Business
Verified Addressexclamation_warningThe official address is at: 53 Britton Street, London, England, EC1M 5UQ

This appears to be a residential area, so an office would not be expected here. The address has not been checked on site.
Verified Ownerflag-iconCameron Miller is listed as the official owner, a person without any online footprint.
Business Registrationexclamation_warningBitWealth Limited is a registered company in the UK, with company number 09981018. It is important to note that Companies House explicitly states it "has no investigatory powers". Hence the registration adds no real credibility.
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.

One Response

  1. saph April 19, 2016

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