Fraud Risk Assessment: BX Mining

BX Mining (bx-mining.com) was launched in October 2016 providing Bitcoin cloud mining services from Canada. It is largely a copy of another scam valled Sea Mining. The website of the latter service redirects to BX Mining, proving they are related.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
Phantom Riches		The website advertises a get-rich-quick scheme that will produce free money in just 1-3 months.
Scarcity		N/A
Source Credibility		BX Mining tries to establish itself as a globally operating cloud mining company, run by "a diverse group of Mining Experts, Engineers, Entrepreneurs and Investors". The opening dates of the locations, however, make little sense. The UK office is said to be "Coming by December 2014". The BX Mining website wasn't created until October 2016 (see Registration Details). A business registration in the UK cannot be found either.
Social Proof		N/A
Reciprocity		Users can get 1 KH/s up to 750 KH/s for free upon signing up.
Products
Guaranteed Return		Investments are guaranteed for the first 15 days.
High Return / Low Risk		BX Mining states that an investment could be earned back completely in just three months. This comes down to an unrealistic and unsustainable rate of return of well over 20% per month.
Overly Consistent, Positive Returns		Returns may vary, but they are always strongly positive.
Downplaying Risks		The website adds a false sense of safety by claiming contracts start to be profitable "within 1-3 months". It even adds the word "Guarantee!!" to that, even though that statement is weakened later on.
Hardware Equipment
Public Mining Address		No
Pictures of Mining Equipment		None
Secretive or Complex Equipment		Users buy KH/s lacking any significant description of underlying equipment. At best, the website only mentions 2 mining farms supposedly exist.
Service
Website Available		Yes
Website Registration Details		BX-mining.com was registered October 29 2016. It is the successor of sea-mining.com, which still redirects to bx-mining.com.
Website Design		BX Mining is a typical lazy scam, with most of the content copied from its predecessor Sea Mining.
Grammar on Website		Even linguistic errors have been copied from Sea Mining (see Website Design)
Payments Options		Bitcoin only
Service Disruptions & Unbusinesslike Conduct		BX Mining is evidently linked to Sea Mining, which was nothing but an ordinary Ponzi scheme.
Contact Information		The address is included in the FAQ, but a telephone number is not provided.
Business
Verified Address		The given address is: 142 Traders Blvd E, Unit# 42, Mississauga, ON L4Z 2E5 This address could not confirmed. The website registration details have been hidden (whois privacy protection), and also the business registration could not be verified (see Business registration). The address is, at least, also very popular for scams, as the Nexus Miner scam used to be "located" on the same business centre. Also Sea Mining used the same address.
Verified Owner		The owner could not be determined due to a lack of information. The website registration details have been hidden (whois privacy protection).
Business Registration		Despite the given address a registration could not be confirmed. Ontario's company register isn't publicly accessible.
Independent Audits		None
Total Flags: 16 (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.

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.