Fraud Risk Assessment: HashOcean

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  • HashOcean
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  • Last modified: December 7, 2017
  • Legitimacy
    Editor: 1%

HashOcean ( went live in January 2015 and provides cloud mining services from the United States. 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.

Total Flags: 14 (3 Warnings = 1 Flag)
Phantom Richesexclamation_warningAdvertising "Return on investment within 5 months".
Source Credibilityflag-iconClaims to have a long history (the profitability graph starts in October 2012), even though website was not created before January 2015 (no registration prior to this date).
Social Proofexclamation_warningReferral program awarding 5 percent commission.
Reciprocityexclamation_warningTrial for 15 KH/s "free and forever".
Guaranteed Returnthumb-up-iconN/A
High Return / Low Riskflag-iconExtremely high returns with an expected ROI of well over 20 percent per month.
Overly Consistent, Positive Returnsflag-iconDaily profitability is consistently high and does not change in line with the total network hashrate, difficulty, or exchange rate. For the entire history the maximum difference between the highest and lowest return per day is just 10 percent and seemingly mean reversing at around 0.0071 BTC per MH/s.
Downplaying Riskflag-iconHashOcean "guarantees you the full refund if you don’t like their service operation for any reasons"
Hardware Equipment
Public Mining Addressflag-iconNo
Pictures of Mining Equipmentflag-iconNone
Secretive or Complex Equipmentflag-iconThe website mentions HashOcean mines on Scrypt, and shows that 1 MH/s returns 0.0074 BTC per day (21-Jun-2016). At the same time, it can easily be established that 1 MH/s is simply unable to produce this amount. Casinocoin is currently the best Scrypt coin to mine, returning just 0.00012194 BTC per day. Since the total network hashrate of this coin is less than 2 GH/s, and HashOcean claims to have 400 GH/s, the actual number HashOcean could be mining per day will be even lower. Most of the hash power would have to be allocated to Litecoin (1.38 TH/s), which returns 0.00007608 BTC per day. HashOcean is thus mining almost 100 times more than what is mathematically possible. HashOcean does not explain how it does this.
Website Availablethumb-up-iconYes
Website Registration Detailsexclamation_warningRegistered January 2015, for a period of just one year.
Website Designflag-iconTerms of use not present.
Grammar on Websitethumb-up-iconGood
Payments Optionsexclamation_warningBitcoin only
Service Disruptions & Unbusinesslike Conductflag-iconMissing terms and conditions result in no legal basis for doing business. Also product prices have been as consistent as the returns, with no differences between now and March this year (provided by the Wayback Machine).
Contact Informationthumb-up-iconBoth an address and telephone number (+1 650-603-5816) are included.
Verified Addressflag-iconThe given address is:

199 Leidesdorff St. San Francisco, CA 94111

But Google maps shows a bar at this location, and the company doesn't have a business registration number either (see "Business Registration").
Verified Ownerflag-iconThe name of the owner could not be found. The website WHOIS information is hidden, and the company has no business registration (also see "Verified Address" and "Business Registration").
Business Registrationflag-iconThe company is located in California, United States. There is, however, no registered company with the name "HashOcean" in this state.
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.

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.

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.

Comments (22)

  1. Alexander Orlov June 19, 2016
    • Digiconomist June 19, 2016
      • Alexander Orlov June 19, 2016
        • Digiconomist June 19, 2016
          • Alexander Orlov June 19, 2016
          • Helene_B July 17, 2016
          • Digiconomist July 17, 2016
          • chinky dennis June 25, 2016
      • Rui Gama June 21, 2016
    • Marco June 28, 2016
      • Alexander Orlov June 29, 2016
        • John Maselli June 29, 2016
  2. Rui Gama June 20, 2016
    • Digiconomist June 21, 2016
      • Rui Gama June 21, 2016
        • Digiconomist June 21, 2016
          • Rui Gama June 21, 2016
          • Digiconomist June 22, 2016
          • Rui Gama June 22, 2016
          • Rui Gama June 26, 2016
    • Digiconomist June 26, 2016
  3. Ahmed Abdo June 28, 2016

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