With the crypto industry so new and so -- fortunately -- unregulated, there's plenty of room for scams.
BitPetite, USI-Tech and so many others (perhaps even BitConnect and BitClub), I thought it worth mentioning this article which helps you spot and hopefully avoid a scam:
https://bitcointalk.org/index.php?topic=878387.0
For simplicy, here's the content of the article (which I did not write):
Everyone here is focused on ROI, hardly anyone seems to care if these companies are legit. The majority of cloudmining websites dont do any mining whatsoever. They pay out old customers via coinmixers from revenue that comes from recruiting new ones. This is the common definition of a ponzi scheme. No surprise, to keep the game going they usually heavily emphasize referrals and signature campaigns to make you do their dirty PR work.
Now why would you care if these companies are mining or not? All that matters is they pay out, right?
Wrong.
If the company (or more aptly: scammer) isnt mining, then its impossible on average for the investors to profit. Early investors might, but only at the expense of later ones and only if the ponzi can survive long enough. If no mining is going on, then there is nothing to generate those profits. So dont be fooled by low prices or high payouts. Ponzi miners will drop prices as low they need to keep the game going until one day they vanish.
And dont think because its been running for 10 months, that it has to be legit either. Unlike traditional ponzi's, mining ponzi's dont risk a bank run. You cant get your money out if you begin worrying, so they can run a fairly long time.
Take PBmining, they have been around since the beginning of 2014 and havent failed to pay so far. Does that prove its not a ponzi? Hardly. Based on their own stats, in the past month they sold ~1.5 PH worth of contracts. Good for around ~2200 BTC. During that same month they paid around 1600 BTC in dividends. A net profit of ~600 BTC or nearly a 1/4 of a million dollar. Just for running a website. So the fact they are still paying out doesnt prove they are legit, its actually far more likely they are still paying out because it maximizes their profits ( update: pbmning meanwhile collapsed: https://bitcointalk.org/index.php?topic=887871 qed.).
Of course that cant last. At some point the new sales will slow while the owed dividends keep going up. Once the latter becomes bigger than the former, guess what the anonymous operator will do? The same thing lunamine, coinsoncloud, pirate, bitcoin-trader and countless other (mining) ponzi's before did.
Be smart. Think before you invest. Dont trust anyone with a referral link in his signature.
1) No public mining address / no user selectable pool.
A cloud mining company that wont let you direct the hashrate to your pool of choosing and cant prove its actually mining bitcoins itself, is very likely a scam. There is no reason to hide mining address or not sign blocks. None.
2) No endorsement from any asic vendor
Asic vendors will gladly make a simple post to show the company in question is a significant customer of theirs. Its free advertisement for them and it helps their customer grow their business, so there is absolutely no reason they wouldnt. If a (cloud) mining company cant get any asic vendor to post such endorsement, you should assume they dont have any hardware to mine with.
3) No relevant pictures of their hardware and datacenter
There is no reason not to provide such pictures, except of course, if there is nothing to take pictures off. Mind you: pictures can be faked. Picture dont prove current ownership. So like all criteria listed here, by themselves they are by far insufficient proof.
4) Open ended IPO / fractional reverse mining risk
Unless the cloud mining is operated by the asic vendor himself, you can not sell an unlimited amount of hashrate. Hardware takes (usually a long) time to order, arrive and deploy. Any company that doesnt limit sales or make public how much hashrate they sold vs what they have (provably) deployed should be considered suspicious.
5) Referral programs and social networking
Referral programs, especially ones that pay almost 10%, are a huge red flag. The mining market is cut throat with razor thin margins. No real company can afford to pay 10% referrals on below market cloudmining prices. Referral programs almost always serve only to feed the ponzi and provide financial incentive to posters to lie about the true nature of the company. Never trust anyone with a referral link in their sig.
6) Anonymous operators
If the operators are hiding behind whoisguard, provide no provable identity and especially when, like in some cloudmining cases, they use demonstrably false ID or company registration information, you have to be nuts to trust them with your money.
7) No exit strategy
If you cant sell your position, you cant get your money out. Thats the ideal case for a ponzi and allows it to run for a long time.
8 ) Bonus point for "guaranteed profit"
So far, Ive only seen bitcoinmaker.ch do this. If anyone guarantees you a bitcoin denominated profit, and especially a 30+% one, you can be sure its a ponzi, all the other criteria become unimportant. There is no such thing as certain profit when it comes to mining, no one knows how the network will evolve, or what btc exchange rate will do. If anyone could somehow be certain of making a 30% profit, they wouldnt need your money (and they wouldnt give the profit to you).
Application of these criteria to some cloudmining companies
Feel free to post corrections or additions.
Ponzi's that have already collapsed as predicted:
Code:
PBmining.com 1+2+3+4+5+6+7 => 7/7 = Ponzi
Lunaminer.com 1+2+3+4+5+6+7 => 7/7 = Ponzi
coinsoncloud.eu 1+2+3+4+5+6+7 => 7/7 = Ponzi
Cryptomine.io 1+2+3+4+5+6+7 => 7/7 = Ponzi
hashie.co ("gen1") 1+2+3+4+5+6 => 6/7 = Ponzi
bitcoinlabmining.com 1+2+3+4+5+6+7 => 7/7 = Ponzi
ltcgear 1+3+4+5+6 => 5/7 = (very) suspicious
hashprofit.com 1+2+3+4+5 => 5/7 = (very) suspicious
minethatcloud.com 1+2+3+4+5+6+7 => 7/7 = Ponzi
CoIntellect.com 1+2+5+6+7 => 5/7 = (very) suspicious
terabox.me 1+2+3+4+5+6+7 => 6/7 = Ponzi (pictures are not convincing to me for now, exit strategy involves 60+ days stall tactic)
chabatmining.com 1+2+3+5+6+7 => 6/7 = Ponzi
Ecrypto.co.in 1+2+3+4+6+7 => 6/7 = Ponzi (+ confirmed scam, they are no partners of cex.io)
GenerateBTC.com 1+2+3+4+5+6+7 => 7/7 = Ponz
Likely Ponzi scams that have yet to collapse:
Code:
cloudminr.io 1+2+3+4+5+6+7 => 7/7 = Ponzi
cloudmining.website 1+2+3+4+5+6+7 => 7/7 = Ponzi
Skycoinlab.com 1+2+3+4+5+6+7 => 7/7 = Ponzi (+ organized by serial ponzi scammer: ?topic=583177.msg10298730)
btcslice.com 1+2+3+4+5+6+7 => 7/7 = Ponzi (+ pays out in reversible paypal ?)
grmining.com 1+2+3+4+5+6+7 => 7/7 = Ponzi
bitcoinmaker.ch 1+2+3+4+6+7+8 => 7/7 = Ponzi
eobot.com 1+2+3+5+6+7 => 6/7 = Ponzi (+ possible malware/wallet stealing software)
hashwar.co 1+2+3+4+6+7 => 6/7 = Ponzi
bitrush.com 1+2+3+4+6+7 => 6/7 = Ponzi
Code:
nexusmining.com 1+2+3+4+5+7 => 6/7 = Ponzi (Guy from Spondoolies says im wrong, but I cant score what I havent seen and he seems to confirm they have no hardware)
minerslab.com 1+2+3+4+6+7 => 6/7 = Ponzi (+ selling hardware that doesnt exist + using purchased "legendary" account)
bitcoincloudservices 1+2+4+5+6+7 => 6/7 = Ponzi (+ founded by known scammer https://bitcointalk.org/index.php?topic=860400.msg9638868#msg9638868)
scrypt.cc 1+2+3+4+5+6 => 6/7 = Ponzi (preliminary assessment)
Kryptologika 1+2+3+4+* => */7 = Ponzi -> passthrough of AMhash which is defunct. Currently operating as fractional reserve/ponzi.
hashcoins.com ~1+2+3+4+7 => 5/7 = (very) suspicious (user selectable pool requires fee, dc pictures show no miners, linkedin profile doctored, hardware sales very dubious,..)
Zeushash 1+2+3+4+5 => 5/7 = (very) suspicious
Rest:
Code:
Cryptsy MN 1+2+3+4 => 4/7 = Possibly/partially legit ( + no details on fee structure)
cloudmining.sg 1+2+4+7 => 4/7 = Possibly/partially legit
genesis-mining 1+4+7 => 3/7 = Probably legit (risk of fractional reserve mining)
Megamine.com 1+4 => 2/7 = Probably legit
Bit-x.com 1+4 => 2/7 = Probably legit (preliminary assessment, partnership confirmed by Bitfury)
pow88.com 1+2 => 2/7 = Probably legit (preliminary assessment)
KNCcloud 7 => 1/7 = Legit (but as hardware vendor, they broke their promise not to selfmine with more than 5% of customers hashrate )
Hashnest (umisoo) => 0/7 = Legit
Obsolete or suspended:
Code:
AMhash => 0/7 = Legit (if you buy directly) / divs momentarily (?) suspended
Cex.io 4 => 1/7 = Legit
Cryptx PETAmine => 0/7 = Legit
GAWminers 1+4+5+~7 => 4/7*= Possibly/partially legit based on criteria set forth. Based on wider context: more suspicious than a nun squatting in a cucumber field
A ponzi is defined by the absence of a mechanism to generate revenue or profits (in this case: mining hardware). Proving something is a ponzi would therefore require proving a negative. You can not prove a negative, so in theory its possible any of the companies I labeled as "ponzi" are in fact mining. But thats like saying in theory its possible unicorns do exist or that its possible that Nigerian Prince who emailed you yesterday, really inherited a $500M gold mine concession and wants to share it with you. You can not prove thats not true either, but to most sensible people the complete absence of evidence is a very compelling reason to dismiss the claim, and thus certainly reason enough not to invest there.
Recently imploded cloudmining scams that where rated as (very) suspicous or ponzi: 14/14 (100% hit rate)
Companies that were rated as probably/legitimate yet substantially failed to honor their contracts: 1/7 (86 % hit rate)
() Amhash which may yet resume payments, though I wouldnt bet on it
Overall hit rate: 95%
You can help out by reporting new ponzi's and preparing the assessment.
You can tip me on this address: 15YNTMoAzTCve64rveEka75qCeJMZpmDCx
Anything I receive there will be used to further this cause, like doing signature campaigns to raise awareness.
Here is the current signature campaign thread: https://bitcointalk.org/index.php?topic=888864
Feel free to join, you'd be helping a good cause and you might win 0.1BTC
being legit does not equal being a good investment. By and large, cloud mining has not been profitable historically, and I dont expect it will. I do not recommend you invest in (cloud) mining at all, but if you do, at least invest in a company that will actually contribute to securing the blockchain and is not extremely likely to just steal your money.
Also, being rated as legit here doesnt guarantee you anything. All it shows is that said company has provided reasonable evidence it is a real company and your investment is backed by actual hashrate. It doesnt guarantee they wont scam you, and it certainly doesnt imply anything about profitability.
