Tips to Safely Exchange Bitcoin

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What is Bitcoin?

Millions of people all over the globe are looking to buy-in to the bitcoin investment craze with little to no understanding of what bitcoin is and how to properly enter the market. Bitcoin is simply a digital currency that involves no middle men(banks), no transaction fees and no need to give your real name.  Its value is not backed by any government or central bank, but rather is determined by software that few people truly understand.  An increasing number of merchants accept bitcoin and many of the world’s top wealthiest nations are hopping on the bandwagon (See   Bitcoin also significantly reduces the cost of international payments because bitcoins are not tied to any country or subject to regulation.  Therefore, unless you subscribe to the Jamie Dimon book of fraud(see, you have a general instinct that Bitcoin is here to stay.

But freedom from regulation and lack of understanding has an inherent cost.  While the majority of major news outlets and social media are busy highlighting the spike in value of various cryptocurrencies, they have failed to warn the public of the accompanying increase of US law enforcement charging people for selling bitcoin fraudulently and in violation of a law they knew nothing about.

Common Violations and Fraudulent Acts

  1. Selling bitcoin without a license: Selling bitcoin in-person has been the long-existing practice before the currency made it mainstream on bitcoin exchanges.  Traders would use the Finnish site ( see to coordinate sales in their city.  It’s not illegal to sell bitcoin per se, but at least four people across the US this year have been charged or pleaded guilty to the crime of exchanging the cryptocurrency as a “business without a license.”
    • The US Financial Crimes Enforcement Network declared that selling bitcoin as a business is money transmission that requires licensing. Individual states, like New York, have agreed with this interpretation(see New York’s BitLicense legislation:, which says you need a license to sell bitcoin as a business.  Other states like Florida have interpreted such transactions differently.  The keyword here is “business.”  You have to buy-and-sell in a sufficient frequency and volume.  A single transaction typically wouldn’t warrant an investigation.
  2. Malware downloads: Like anything you download from the scam-market they call the internet it’s important to be aware of malware.  Bitcoin is often used as bait to get you to download some nasty software that will mess up your computer. According to Zerofox: “Fake bitcoin ‘wallets’ hiding malware downloads: Attracting users to click through URLs posted to social media is a technique that ZeroFOX has observed in a variety of attacks.”  Use caution when encountering any social media URL that is either shortened or not secured with an HTTPS connection.”
  3. Phishing: Impersonators and con-artists are all over social media, and impersonating the bitcoin brand itself is a tactic that can be used to gain your trust and credibility.  A phishing website offers a search service enticing users to enter in their private bitcoin key to see if it exists in their database. Once entered, the private key will simply be phished, allowing the scammer to spend directly from the curious bitcoin owner’s wallet.”
  4. Flipping: These scams could be an offer to instantly exchange bitcoins for money after paying an initial startup fee or a promise to double your initial investment overnight.  The other end of the bargain is never held-up, and bitcoins are stolen immediately. Scammers succeed because they’re able to broadcast their scam to thousands of unsuspecting targets through social media.”
  5. Pyramid schemes: Oooo great another pyramid scheme. This common scam tactic relies upon high yield investment programs and multi-level marketing. In these ethically grey schemes, a low initial investment can be multiplied by signing up additional members using referral links. Before long, hundreds of victims have joined the scheme. At a later point in time, the original scammer walks away and the pyramid collapses.
  6. Review the Sales Literature: Like any sales pitch, if it sounds fishy it’s probably a lie.  Bitcoin’s value has been very volatile despite the upward trajectory in price.  If you’re looking to be a day-trader in bitcoin and a bitcoin site projects nothing but an exponential increase in bitcoin profit, approach with caution.

Tips to be on the safe side:

  1. If you’re planning to run a bitcoin business, be sure to check the laws of the state you wish to run this money-making enterprise.
  2. Instead of running a business, why not check a bitcoin exchange like Coinbase. Coinbase is a Bitcoin company based in San Francisco, and backed by trusted investors. Coinbase is the world’s largest Bitcoin broker, and also offers an exchange, wallet, and developer API.
  3. Don’t trust anyone claiming they will sell you cheap/free bitcoin or help you mine bitcoin.  Why would someone hand you something worth thousands of dollars for free or help you build wealth without an incentive? Don’t be gullible.
  4. As noted above, avoid URLs associated with social media profiles advertising too-good-to-be-true bitcoin offers.
  5. Be vigilant when engaging with the social media accounts of legitimate bitcoin brokers or trading platforms, as they are frequently victims of convincing impersonations.
  6. Never engage in any financial transaction, bitcoin or otherwise, via direct message on social networks.


If you have already been scammed, report the crime to the FBI’s Internet Crime Complaint Center, but do not expect to see your bitcoins again.


Daniel Tiger


The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this Web site or any of the e-mail links contained within the site do not create an attorney-client relationship between the site and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.




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