Scammers have duped unsuspecting victims out of at least $11 million in bitcoin over the last four years, according to researchers from Southern Methodist University, Dallas.
While simple theft dominates the crypto-currency headlines, more imaginative scams are also costing thousands of bitcoin fans, Marie Vasek and Tyler Moore found in their paper There's No Free Lunch, Even Using Bitcoin: Tracking the Popularity and Profits of Virtual Currency Scams.
The empirical study turned up four types of schemes on the web designed to attract suckers with get-rich-quick promises before making off with deposits. In total, the researchers found 41 scams occurring between 2011 and 2014, in which fraudulent sites stole bitcoin from at least 13,000 victims.
Says Moore: "Because the complete history of Bitcoin transactions are made public, we have been able to inspect, for the first time, the money flowing in and out of fraudulent schemes in great detail. It’s like having access to all of Bernie Madoff’s books for many of these scams."
The most prevalent scams are Ponzi schemes promising investors outlandish interest rates on deposits. Another popular trick sees victims pay upfront for bitcoin mining equipment which never turns up, while wallet and exchange scams have also duped users.
Vasek and Moore found the data by running a Structured Query Language database dump of all relevant bitcoin transactions, before analysing addresses of both victims and the siphoning transactions of scammers.
The researchers only managed to track revenues for about 21% of the scams, meaning, says Vasek: "Our calculation of $11 million is almost certainly at the low-end,” said Vasek. “The amount of Bitcoin that depositors have lost to these scams is probably many millions more."