Trading Bot Scams
What Are Trading Bot Scams?
Trading bot scams are one of many types of cryptocurrency fraud. They take a legitimate concept – the use of trading bots – and abuse it to steal investors’ money. Scams range from poorly coded bots that don’t operate as promised to entire platforms that vanish overnight, taking investors’ money with them.
To put this in context, let’s take a step back and look at what trading bots do. Individuals can use bots to enhance their trading of cryptocurrency, forex, binary options, and more. The bots can react faster than humans and they never sleep. This means they can make split-second decisions that make traders more money. Assuming they have been developed and used properly, of course.
Bots are particularly useful to newbies and inexperienced traders. Many rely on trading bot platforms not just to trade fast and tirelessly but also to cover gaps in their knowledge as they learn the ropes. This is because bots use artificial intelligence to deliver insights as well as automation.
This is where trading bot scams come in. Some scammers create poor-quality bots that don’t function as they should, then vanish when buyers complain. Others provide impressive-looking platforms that seem to work well, with bots delivering returns for the trader – at least at first. However, when the trader then deposits more funds to use with the bot, they lose their account access, and the entire broker platform disappears in a “rug pull” that some yield farming scam victims will find all too familiar. Goodbye bot, goodbye platform, goodbye money.
This means that investors need to be very careful when considering which trading bots to use. It also places a duty on legitimate trading platform providers to support the education of their customers in terms of the threat of trading bot scams, as well as the need to invest in bot detection software.
SEON’s anti-fraud tools leverage the best of machine and human intelligence to identify suspicious usage and uncover hidden fraudsters.
Ask an Expert
Types of Crypto Trading Bots
Cryptocurrency trading bots can be either fully automated or semi-automated. Traders can program fully automated bots to execute trades at any time, in line with the parameters they choose. Semi-automated bots are more limited in what they can do, as they require the trader’s manual authorization before carrying out certain actions.
This use of full automation and semi-automation applies not just to cryptocurrency but to forex, binary options, and other forms of trading. For forex trading, these bots tend to be known as “expert advisors”.
How Do Trading Bot Scams Work?
Trading bot scams work by convincing individuals to use a particular platform for their trades. The trader signs up to the platform, connects to an exchange, and starts trading using the bot. A short time later, the platform disappears, along with the trader’s money.
Key to crypto trading bots scams like this – as well as forex trading bot scams and so on – is convincing traders to sign up. Scam platforms often offer incentives to encourage them to do so. Free trading bots are one way that scammers lure in their victims, as are “guaranteed” returns. In reality, no trading platform can offer this. Any such offer is disingenuous at best and a scam at worst.
Trading bot scams also rely on the growth of their markets for a supply of new victims. The cryptocurrency market is a case in point. According to Statista Market Insights, the crypto market is projected to reach a revenue of $37.87 billion in 2023, growing at a compound annual growth rate of 14.4% to $64.87 billion by 2027. User penetration is projected to rise from 8.8% to 12.5% over the same period.
All these new users wanting to profit from crypto but lacking the experience in how to do so are ideal targets for trading bot scammers.
Are Trading Bots Legitimate?
One reason that trading bot scams can thrive in cryptocurrency, forex, and other marketplaces is that the use of trading bots is entirely legal. While many ecommerce businesses are doing all they can to carry out fraud monitoring and bot detection and combat various types of bots, trading bots remain an accepted way for individuals to enhance their trading processes.
Genuine trading bots from reputable providers can help users ensure they don’t miss a trade, no matter what time of day or night it may be. Their use is perfectly legitimate, enabling individuals to create round-the-clock trading programs in an attempt to grow their profits.
Three Examples of Trading Bot Scams
Sadly, there are plenty of examples of forex and cryptocurrency trading bots that have turned out to be scams. Let’s check out some examples.
| Scam | Details |
| iEarn Bot | iEarn Bot, while still operating at the time of writing, is widely believed to be a crypto trading scam. The company “guarantees continuous income” to its users, including traders with zero experience. It says its profits are “generated automatically through high-frequency robots.” However, a BBC investigation revealed in March 2023 that thousands of investors around the world may have been misled by iEarn Bot. The company’s supposed founder and strategic partners have never heard of it, while users report being unable to withdraw their funds, including some who paid a 30% fee to make a withdrawal – and then still couldn’t do so. |
| Bitconnect | Bitconnect launched in 2016 as an open-source cryptocurrency connected with a trading bot to deliver high yields to investors. Users traded Bitcoin for Bitconnect Coin, while earning daily interest. At least, that was the promise. In 2017, the UK government challenged Bitconnect to prove its legitimacy. A cease and desist from the Texas State Securities Board followed in early 2018. Bitconnect shut down two weeks later. |
| Mirror Trading International | Mirror Trading International used Bitcoin as its base currency, with trading bots automating forex trades. Investors needed no experience: They simply had to deposit $100 worth of Bitcoin or more, then “sit back and relax” while Mirror Trading International enabled their “Bitcoin to grow daily.” Company executives claimed average returns of 10% per month. However, by 2020 it had become clear that all was not as it should be. Mirror Trading International had taken $589 million from over 471,000 deposits by that point. As investors reported being unable to withdraw their funds and the authorities in the US and South Africa moved in, CEO Johann Steynberg vanished with investors’ funds. He was caught in Brazil in December 2021 and jailed. |
SEON’s granular, fully customizable fraud protection safeguards crypto firms and minimizes user friction.
Ask an Expert
Signs a Crypto Bot Is a Scam
Poor grammar, a lack of reviews, and a lack of detail about the tech behind the promises are all signs that a crypto bot could be a scam. So are promises of guaranteed returns.
As with so many scams, such as phishing attacks, one early warning sign is the use of poor grammar and formatting. The iEarn Bot website is a clear example of this, with a layout that doesn’t adapt to browser window size and a litany of grammatical errors.
Another sign that something is amiss is a lack of online reviews. Genuine platforms that have been around long enough to be trusted will have plenty of reviews on Google and elsewhere. As such, if reviews are thin on the ground, it could be time to keep your money safely in your (digital) wallet.
A healthy dose of common sense is also important when it comes to spotting scam signs. Returns are not guaranteed when you trade. As such, if a platform “guarantees” you will make a profit, it’s time to walk away.
Individuals should remain vigilant when it comes to using trading bots to ensure that they spot these warning signs and take heed. Investors should also remember that trading bot scams aren’t the only threat they face. Account takeover fraud is an ever-present threat in forex trading, for example, meaning that both investors and the platforms they use need to remain on their guard against scams of all sorts.
Related Terms
Related Articles
Sources
Contact Us for a Demo
Feel free to reach out to us for a demo!
