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Warning! A Storm is Brewing Over Increased Trader Bot Scams

Estimated reading: 7 mins

A Storm is Brewing Over the Increasing Number of Trader Bot Scams

It's in the public domain that trading cryptocurrencies have become popular worldwide. This popularity is due to numerous benefits virtual currencies provide including privacy, confidentiality, access to speedy transactions and affordable fees.

As such, trading robots or ‘bots’ have opened the doors to new traders, including those that lack prior knowledge or experience of the financial markets. You no longer need thousands of dollars to buy Bitcoin directly, and with access to options of credible internet brokers, anyone can trade cryptocurrency today and profit.

Another significant benefit of this space is the continual release of more effective trading products as the popularity of crypto trading continues to increase. These include, for instance, expert advisers, analysis tools, automated trading bots, trading signals, and much more. The primary reason for the design of these products is to lower the risk of trading while increasing profits.


Enter, Stage Right: Scams!

But, since the space of crypto-assets is often not regulated by institutions like financial market authorities, it is hectic to acquire accurate information on the number of scams. This absence of policies attracts people critical of the present monetary system and champions for a more libertarian vision of the economy. Alas, it also intensifies the risks.

Cryptocurrency related fraud, scams and theft sprouted in the first quarter of this year to a whopping US dollar 1.2 billion! This number is according to a report by CipherTrace, a cryptocurrency security firm. Among the most notorious exchange thefts, New Zealand–based Cryptopia got hacked to death following the loss of $23 million (NZD) in January.

Unfortunately, there are always bad eggs out there who prey on other's emotions and trust. There are so many different scams floating around so make sure you familiarise yourself with commons scams to avoid.

Once again, trader bot scams seem to be making the rounds on the internet. So, to help you avoid falling prey to them, here are some of the tricks that trader bot scams often use:


Trader Bot Scams - Wash Trading

1. Wash Trading

Wash trading is a process whereby a trader purchases and sells a security for the express intention of feeding misleading information to the market.

When applied to the crypto market, wash trading often entails illegal activities to artificially boost the trading volume and make a false impression of a liquid market.

There are two primary groups of beneficiaries of wash trading: primary stakeholders of crypto assets and crypto exchanges:

a) Crypto Exchange:

There are over 240 exchanges whose trading statistics are published by CoinMarketCap, although the real figure is higher than this. For a new exchange to "stand out from among the crowd", they often get attention from the community through higher positioning in the list of top exchanges by trading volume. When the real trading volume declines, the artificial one comes in.

b) Crypto Assets:

The logic behind wash trading in cryptocurrencies is unprecedented. Higher volume displays great attractiveness of an asset. High volumes are usually a sign of higher liquidity, although, this is not always true. Also, higher volumes often positively correspond with higher market capitalisation, i.e., the higher worth of a crypto's major stakeholder.

In cryptocurrency markets, there are, however, market companies whose services are about creating fake volumes as opposed to offering liquidity. The primary activity of those fraudulent market makers is escalating the volume of a particular coin, but they may as well provide wash trading across various assets for an exchange. Fortunately, there is a different class of marketers that place market integrity above all else.


2. Initial Coin Offerings

These are fundraising techniques for newly launched cryptocurrencies. Investors in ICOs benefit through tokens in the latest venture. Over the past years, investors have spent billions of dollars into over 1,000 ICOs! While some ICOs are genuine, a vast majority have no actual business technology or plan behind them.

Many get established with nothing more than a whitepaper written by people with no industry or technology experience. New altcoins usually make unproven claims concerning their products. Last year, New Zealand's Financial Markets Authority (FMA) added three more crypto ICOs to its blacklist that provides awareness regarding scams.

OneLife Network Limited together with OneCoin Limited were also included in the list since they “bear the traits of a scam” and promise unreasonable profits.

The FMA also discovered that the mentioned firms were offering investments and holding promo events, and operating as unlicensed financial services in contrary to New Zealand's law.

Another crypto firm, Bitcoin Revolution Limited, was accused of engaging in a scam as well. According to Finance Magnate's report, the crypto trading company made a dubious statement on its website, like “Earn up to $1000/hour or more, starting today.”




3. Online Anonymity

The essence of the internet is to help you access information faster. However, the rising number of fake bots makes it challenging to know the actual founders of such software or their parent companies. They also provide no information on investment strategies. The shortcomings with bots like this are that there is no surety. You can easily make a mistake and invest in a project like this worsening, instead of solving your financial issues.

In a bid to maintain online anonymity, some bots are duplicated or built with a relatively standard WordPress template. Sometimes their associated IP address uncovers a host of other related websites - many of them linked to other investment bots. For instance, icenter.co shared the same IP address with customhyipbot.com, a High-Yield Investment Program (HYIP), which promises (with horrendously poor grammar) to design custom Telegram bots for any project.

Everything screams SCAM! Right from the beginning.

Therefore, the best thing to do is not to put your money in since most fraud software shares some few shady practices in common:

  • Securities Focus: Promises of personal securities in both bonds and stocks with huge returns over the period, which also can't be confirmed. Such bots can also copy an individual's confidential account data and submit it to a third party.
  • Fundamentals: Profitability management and pricing evaluation are only one of the features that they are interested in offering to their clients.
  • Long-term Perspective: Long-term potential needs to be incorporated since quickly utilises the short-term.
  • Active Management: In this level, they outline their goals and highlight high active shares which independent sources can't confirm.



4. Automated Ponzi Schemes

Some groups such as Telegram channel Big Pump Signals have been using fake cryptocurrency news and fake social media accounts to intensify buying exaggeration surrounding coins. Big Pump Signal operates pump-and-dumps every week with over 77,000 users on Telegram and further 200,000 members on Discord, a messaging app for gamers.

Apart from serving as a literal breeding ground for pump-and-dumps, Telegram also accommodates many cryptocurrency trading bots promising too-good-to-be-true gains and promotions of quick riches to users interested to invest in bitcoin. Usually, these bots are Ponzi schemes operated by anonymous “investors” who eventually take the pool of money and disappear.

Since Ponzi schemes perform by recruiting more and more new users, social channels such as Bitcoin forums, Twitter, and Telegram are productive recruiting platforms for their proprietors. Before the internet age, there were telephone-based scams that would call you up and promise you a great investment opportunity. Even Charles Ponzi himself had a storefront and spread the news via the newspaper.

The bots on Telegram provide a unique level of sophistication. Many bots such as Global Trading Bot, promised to leverage the crypto arbitrage in global rates, where there can be a disparity in valuation. For instance, purchasing a bitcoin on a US-based exchange and then selling on a New Zealand exchange, where it may have increased charges. The bots instruct the user to submit a certain amount of altcoins or bitcoin to a digital wallet. The bots then invest the cryptos on your behalf for roughly one to three months before you can begin to "withdraw" the cash.

In the meantime, you can use the Telegram bot to confirm your "ever-increasing" balances. This bot offers a record of your expected 1% increment every four hours and sends you links to share with family and friends.


What's the Catch?

But usually, it's all scripted. Founded in 2017, Global Trading Bot ceased replying to subscribers with an administrator indicating on January 4th that:

“The project is over now because the bot ran out of funds”.

A series of angry posts and messages on the bot's Facebook page followed. However, the unrecognised administrator for the bot's related Telegram community had few words on the explanations. “All I know is that bot ran out of funds,” the administrator explained, just like a classic Ponzi scheme.


5. Fake Trading Platforms and Ads

And speaking of fake, one cryptocurrency bot called icenter.co managed to dupe dozens of people with this slogan:

“relax and watch your bitcoins grow.”

It marketed a bitcoin bot it purported has been operating for 202 days, with over 115 bitcoin invested. Before its closure, iCenter promised “Free Bitcoins” just for visiting their website, an attractive promise to be sure!

iCenter was pure duplication of a crypto mining machine operating two investment bots on Telegram. One for Litecoin deposits and another for bitcoin. And its developers worked tirelessly to make it sound legitimate! The news column of the site featured informational posts with some duplicated content from premium crypto websites. Most of the articles often reminded browsers that iCenter was "not a pyramid scheme, Ponzi, or a scam.

There are also sites featuring fraudulent celebrity video endorsements. In one, a fake NZ Herald website purported that former New Zealand Prime Minister, Sir John Key, is an avid investor in Bitcoin (BTC).

Other scammers also go to the extent of impersonating cryptocurrency evangelists, tech CEOs, and even President Donald Trump! The scammers use old school tricks on social networks to lure people in for quick riches.

Trader Bot Scams
Free BTC just for visiting your site?! Wow! Totally believable! Obviously real! Let me quickly install my click bot and get money, get paid... #sarcasm


The Bottom line When it Comes to Trader Bot Scams

Crypto markets are here to stay, and it seems likely that bots are as well. Well, as long as the market remains so unregulated.

There is already a growing number of trading bots that assist traders, ensuring they often engage with the market. The engagement process can either be physical or automated. Such bots can help in eliminating some of the emotions and stress that usually exist in any financial trading market. Especially the crypto market.

However, trading bots aren't for everyone. Casual investors aren't the ideal target for trading bots. Therefore, if your objective is to purchase and hold Bitcoin, a trading bot is perhaps not the best idea.

Furthermore, if you aren't a competent programmer or conversant with the design of financial strategies, trading bots may also not be suitable for you. However, if you have the essential ability and knowledge to overcome these hurdles, then a trading bot can be a valuable tool in supervising and making profits from the Bitcoin market.

Just remember, always perform your due diligence first!

Trader Bot Scams


About the author:

Verolian Opiyo is a former teacher of English turned content strategist. He specialises in
writing about FinTech and next-generation technology.


Disclaimer: The above references an opinion and is for informational purposes only. Do not take this as personalised financial or investment advice. The opinions expressed by the author do not represent the opinion of BitPrime.

Last updated: 27/07/2019

4 thoughts on “Warning! A Storm is Brewing Over Increased Trader Bot Scams”

    • Hi Max!
      Sorry for the slow reply – I’ve just found the answer for you. Yes, they are a scam too. Here is the FMA’s article on them: fma.govt.nz/news-and-resources/warnings-and-alerts/hyperfund/

      “The FMA are concerned HyperFund may be operating a scam.

      HyperFund operates on a Multi-Level Marketing (MLM) model and claims to offer passive investment opportunities. We have received reports of them recruiting affiliate investors in New Zealand. It is not registered or licensed to provide financial services/products in New Zealand.

      The website thehyperfund.com now redirects to thehyperverse.net.”


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