'Bitcoin Mining' Ponzi Scheme Targets Upper East Siders on Instagram/Unsplash
'Bitcoin Mining' Ponzi Scheme Targets Upper East Siders on Instagram/Unsplash

‘Bitcoin Mining’ Ponzi Scheme Targets Upper East Siders on Instagram

MANHATTAN – The offer sounds too good to the true: invest $500 in a Bitcoin mining operation and get $10,000 back in just two hours. The eye-popping proposal is sure to have its doubters, but the next scam pushed on you could come from a trusted friend who’s fallen victim themselves. At least one Upper East Sider has fallen victim to a new online Ponzi scheme— and is actively recruiting their friends and loved ones to hand over the life savings to a swindler hiding behind an Instagram account. 

Upper East Site first learned of the new Ponzi scheme on Monday when a follower who had communicated with our Instagram account previously to ask about local news tagged us a screenshot she had just posted to her account.

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It appeared to some kind of bank app showing a $10,000 balance and the caption read “God bless you chairwoman 🥰😍 I’m so happy I can’t believe that I can make my dream I cant believe bitcoin is real come true I’m so glad to inform you all to invest in bitcoin mining within 2 hours I invested $ 500 in 2hours time I have earn profit of $ 10,000 and make a successful withdrawal into my cash app here is the proof I want you all to follow her now to get paid today.”

'Bitcoin mining' Ponzi scheme asks for 'investment' for guaranteed returns
‘Bitcoin mining’ Ponzi scheme asks for ‘investment’ for guaranteed returns

Our first thought was this follower’s account was hacked and was spamming everyone— we reached out to her to learn that was not the case.

“I just invested $500 on Bitcoin Mining and I got back $10,000 profit in 2hours,” the follower wrote back to us, brimming confidence in her financial decisions.

“I made a successful withdraw to my cash app, it safe and legit I got my profit in my bank account.”

“DO NOT GIVE THEM ANY MORE MONEY,” we warned her.

Ponzi scheme victim refuses to accept reality of scam
Ponzi scheme victim refuses to accept reality of scam

“I got my profit in my bank account,” the scam victim fired back— positive she wasn’t being taken for a ride. 

“It’s so real and legit.”

“They’re going to clear out your bank account,” we warned again— this time sending her an article about a Ponzi scheme similar to the one she was now a part of.

“She’s 100% legit i have already introduced a lot of people to her so they also got their profit successfully,” the scam victim told Upper East Site.

“It’s really working a lot of people are now receiving profit from this.”

At that point the follower blocked our account— clearly not willing to heed our warnings— but the circumstances described in our short encounter contained several red flags pointing directly to a Ponzi scheme.

Ponzi scheme victim refuses to accept reality of scam
Ponzi scheme victim refuses to accept reality of scam

WHAT IS BITCOIN MINING?

The premise that a $500 investment in Bitcoin mining would reap a windfall of $10,000 in just two hours preys on a person’s general lack of knowledge about cryptocurrency and how it works and then the Ponzi schemer gains the victims confidence by delivering real profits.

Bitcoin is a decentralized currency whose transactions are processed on a common ledger through so-called Bitcoin mining— when energy-intensive servers process a certain number of Bitcoin transactions, a new coin is generated for the processor, or so-called miner. 

Mining for Bitcoins is nothing more than having a server farm running non-stop processing transactions. There is no part of the process of bitcoin mining where a $500 investment could realistically increase in value twenty times over in just two hours. 

Is the $500 going to more servers? More electricity?

It’s this part that truly leverages a person’s misunderstanding of cryptocurrency and the hype of hearing people make wild profits off Bitcoin and its competitors. Those are exceptions to the rule, made possible through wild fluctuations in the price of Bitcoin itself or long term holdings— not mining of cryptocurrency. 

WHAT IS A PONZI SCHEME?

The $10,000 received by our follower-turned-scam victim was likely the real deal— but it was likely money from the larger scheme itself. She wasn’t making an investment in Bitcoin mining, the Ponzi schemer was really making an investment in her. 

By actually delivering a profit, it gives the victim the so-called proof to prove to friends and loved ones that the scam is real, so they turn over their own life savings to the scammer. 

The largest Ponzi scheme in history was perpetrated by the infamous Upper East Side financier Bernie Madoff— whose $64 Billion dollar grift stole the life savings of thousands of investors and ruined thousands of lives. 

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HOW IS THIS A PONZI SCHEME?

The first thing you have to remember is there is no Bitcoin mining happening. In fact, there’s no cryptocurrency at all. 

This is an unscrupulous individual asking for US dollars and paying ‘returns’ in US dollars using the money from earlier investors— sending payouts and giving the appearance of a real profit. 

That’s why the scammer needs you to recruit your friends and family— Ponzi scheme’s constantly need infusions of cash from new victims to pay returns to the old victims, to make it appear the investment is legitimate.

The Federal Trade Commission says the warning signs of a scammer are easy to spot— if you know what to look for.

  • Some companies promise that you can earn lots of money in a short time 
  • Scammers guarantee that you’ll make money. 
  • Scammers promise big payouts with guaranteed returns. 
  • Scammers promise free money. 
  • Scammers make big claims without details or explanations.
  • Promoters emphasize recruiting as the real way to make money.

If you think you’ve fallen victim to a scam on social media, the Federal Trade Commission says to contact the platform itself first to alert them— then contact the FTC to report the fraud at ReportFraud.ftc.gov.

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