Scam of the day – January 8, 2015 – Hackers steal 5 million dollars worth of Bitcoins

Earlier this week, the British Company Bitstamp was forced to suspend its operation following a hacking of the company in which five million dollars worth of Bitcoins, the electronic currency, was stolen.  Hacking is not unusual in the world of Bitcoin exchanges.  In February of 2014, Mt. Gox, then the largest Bitcoin exchange went out of business following a massive hack resulting in the theft of 437 million dollars worth of Bitcoins.  It should be noted, however, that the amount of Bitcoins stolen in this hacking represents only a small amount of the Bitcoins held by Bitstamp which wisely locks most of their Bitcoins in computers that are not connected to the Internet and therefore not susceptible to hacking.  This is the type of security that companies such as Sony should be doing when trying to protect some of their digital assets and data.

TIPS

Bitstamp has indicated that it is shutting down only temporarily as a security precaution, however, they warned Bitstamp customers not to make deposits to previously issued deposit addresses.  Although Bitcoins continue to grow in acceptance and use, it is important for people using this form of digital currency to be sure that the companies with which they do business in this regard are providing heightened security.

Scam of the day – May 15, 2014 – SEC issues bitcoin warning

Recently the Securities and Exchange Commission (SEC) has issued a new warning about the risks of Bitcoins and other forms of virtual currencies.   Bitcoins are a system of digital currency that can be used throughout the world.  Unlike other online payment systems such as PayPal, there are no charges or commissions for using Bitcoins.  Some speculators have gone into trading Bitcoins, which is indeed a risky investment.  Unfortunately, Bitcoins are not a true currency issued by a government and regulated by any nation.  Also, unfortunately, the security of the major Bitcoin exchanges has not been as secure as major banks and other major financial institutions and they have been easy pickings for hackers whose  hacking into the largest Bitcoin exchange, Mt. Gox resulted in a loss of 850,000 Bitcoins and a declaration of bankruptcy by Mt. Gox.  Bitcoins have also been used in Ponzi schemes and other fraudulent investment schemes where scammers take advantage of the average consumer’s lack of knowledge about Bitcoins

TIPS

As an investment, Bitcoins are highly speculative and their value could easily plummet for many reasons including the general lack of security by major Bitcoin exchanges.  As for using them as currency, the lack of regulation makes them a risky way to pay for goods as well as the fact that you are seriously limited as to the places that will accept Bitcoins.  As with any investment, the rules for avoiding scams apply.  Be wary of guaranteed high returns and don’t invest in anything unless you have investigated both the investment and the person offering to sell you the investment.