Genesis Mining: Claiming Sold Out Hashing Power, After Cease and Desist Order

March 14, 2018

As Bitcoin's network and other blockchains attract miners, the Genesis cloud service is aiming to get new machines on board.

The Bitcoin network continues to attract hashing power to itself, as the appeal of mining never disappears. Recently, Genesis Mining announced its packages of hashing power are sold out for now, and the company will move on to ensure extra machines.

Mining Bitcoin remains still the most attractive proposition, used in both legitimate cloud mining services, but also in scams. The chief form of cloud mining scams is the referral program, which has a pyramid structure.

This is the possible reason why the South Carolina regulators recently issued a Cease and Desist order for Genesis Mining. The basis for the order are the offerings of mining contracts, and the rationale of the authorities resembles that for BitConnect. The mining contracts were offered to residents by agents who were not officially registered – grounds enough to stop activities.

Also, Genesis Mining and its related company, Swiss Gold Global, did not file for exemption for the sale of securities.

Genesis Mining was seen as one of the potentially profitable cloud services, whereas most cloud services were considered fraudulent. Yet clients have been complaining about delayed payouts in the past months.

Bitcoin Wallet Mining Scams

Another type of scam has been spreading in the past months – so  called wallet mining. Through various social media, users are invited to harness a regular computer for mining Bitcoin. This is an impossibility in 2018, when the Bitcoin hash rate is made up of thousands of powerful, specialized machines, with powers the equivalent of a thousand computers.

Messages like that are making the rounds on Twitter. The catch is that the so called miner will often generate a new wallet and require that the user puts in a predetermined balance. There is a promise of receiving inordinate amounts of Bitcoin from “mining”, ranging from 0.5 to 5 BTC per week, an amount impossible even with real mining.

The problem is that if someone generates a wallet for another user, they will know the private keys. So this scam in effect resembles the Twitter giveaway promises. There is no way that a Bitcoin balance in a wallet helps mining the asset in any way.

There are other versions of the scam, but at one point they all include a tainted wallet with an exposed private key.

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