Fraud Risk Assessment: CLDMine

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  • CLDMine
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  • Last modified: December 7, 2017
  • Legitimacy
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CLDMine ( was launched in September 2015 as a cryptocurrency cloud mining service. 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 Richesflag-iconThe website advertises "high earnings" and returns "up to 1.5% a per day".
Source Credibilitythumb-up-iconN/A
Social Proofflag-iconCLDMine has referral program that offers up to a staggering 15% commission. For a normal business this would mean they would be giving away any profit margin, but it's typically very high for Ponzi scheme that survive on bringing in more users.
Reciprocityexclamation_warningUsers get a small free trial to encourage signing up.
Guaranteed Returnflag-iconReturns are not explicitly guaranteed, but there are not any risk disclaimers either. At the very least this is creating the illusion of safety.
High Return / Low Riskflag-iconUsers can earn around one percent or more per day on CLDMine. The featured profit calculator establishes that this boils down to a rate of 365% per year. Even though this is already extremely high and unsustainable by nature, the option to reinvest profits is clearly not even included. This should result in a compounded rate of return of more than 3650% annually.
Overly Consistent, Positive Returnsflag-iconCLDMine has a variable earnings percentage, but it moves between a very limited bandwidth. It varies from 0.8 to 1.2 percent per day, with an average of one percent. It is also always a strong positive number, indicating a lack of influence by external variables such as coin price movements or mining difficulty and hashrate.
External Risk Insurancethumb-up-iconN/A
Hardware Equipment
Public Mining Addressflag-iconNo
Pictures of Mining Equipmentflag-iconNone
Secretive or Complex Equipmentflag-iconCLDMine only mentions it will "rent [the] latest technology equipment for mining", but fails to even describe the equipment in more detail. Along with previous items, the presence of any real equipment is unlikely.
Website Availablethumb-up-iconYes
Website Registration Detailsexclamation_warningThe website was registered on September 30 2015, and is set to expire in one year.
Website Designexclamation_warningThe website looks like a lazy effort (see Grammar on Website), while containing too little information (see Unbusinesslike Conduct).
Grammar on Websiteexclamation_warningThe website features multiple languages, but it has clearly been translated by an automatic translator. The owner's only concerns has been reaching a large enough audience.
Payments Optionsexclamation_warningMultiple, but all options let the website owner remain anonymous.
Service Disruptions & Unbusinesslike Conductflag-iconThe terms of use include just three sentences, severely limiting them. The lack of specific terms and conditions results in limited legal basis for doing business.
Contact Informationflag-iconThe only way to contact the company is via email. An address or telephone number is not included.
Verified Addressflag-iconThe address could not be determined due to a lack of information. The website registration details have been hidden (whois privacy protection).
Verified Ownerflag-iconThe owner could not be determined due to a lack of information. The website registration details have been hidden (whois privacy protection).
Business Registrationflag-iconAt the very least a country of origin is required to find a business registration, but even this could not be determined.
Independent Auditsexclamation_warningNone
Total Flags: 15 (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 (9)

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