Cloud Mining Scam| New Zealand’s Crypto Scam Guide (2024)

Cloud mining allows individuals to mine Bitcoin, without owning or managing the hardware themselves. Instead, users pay to rent mining power from a company that operates and maintains the mining equipment.

Nic Turnbull
September 24, 2024

Warning! If you suspect you've been scammed or fallen victim to a cryptocurrency fraud, don't wait! Contact Crypto Consulting NZ immediately. Our team is here to help guide you through the next steps.

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What to do if you’ve been Scammed

If you’ve fallen victim to a cryptocurrency scam it’s critical to take immediate action. At Crypto Consulting NZ, we specialize in scam support services tailored to your specific needs. We’ll help you confirm if you’ve been scammed, guide you through documenting your case, and provide expert advice on what to do.

Whether it’s a Cloud Mining Scam or Rug Pulls our team can assist with every step of the process to ensure you’re informed and protected moving forward.

What is Cloud Mining?

When a block is mined, the rewards are shared between the users and the company. This approach eliminates the need for users to set up their own physical mining hardware, secure high-speed internet, source electricity, or manage equipment maintenance.

How Does Cloud Mining Work?

Cloud mining operates on the principle of pooled mining, where users purchase a portion of “hash power” from a mining farm— a remote facility dedicated to crypto mining. The provider handles all technical aspects, and users receive payouts based on the amount of hashing power they’ve rented.

This setup allows people from remote areas with limited infrastructure or technical expertise to participate in mining. Unlike traditional mining, which requires hardware, cloud mining takes place entirely “in the cloud.”

Now that we understand what cloud mining is, let’s take a closer look at how these cryptocurrency scams operate.

What is a Cloud Mining Scam?

A cloud mining scam occurs when a company claims to rent out mining hardware and offer returns from cryptocurrency mining, but in reality, there is no mining taking place. These companies take your investment with no intention of delivering the promised profits.

How Does a Cloud Mining Scam Work?

In most cloud mining scams, companies lure investors with the promise of high returns by renting hash power. However, they use the funds from new investors to pay off earlier ones, creating a Ponzi scheme. Eventually, the scam collapses, and investors are left with nothing.

Examples of Cloud Mining Scams

Two infamous cloud mining scams, HashOcean and Bitcoin Cloud Services, duped investors by claiming to operate large mining farms. They initially paid out small amounts to early investors to appear legitimate, but eventually disappeared with millions of dollars worth of crypto including Bitcoin.

Red Flags of Cloud Mining Scams

Cloud mining scams are prevalent due to their deceptive tactics that lure in unsuspecting investors. To protect yourself, it’s essential to recognize the warning signs of these scams. Here are some key red flags to watch out for:

Promises of Guaranteed High Returns with Little or No Risk
Legitimate investments always carry some level of risk, and cryptocurrency mining is no exception. However, many cloud mining scams entice potential investors by promising unrealistically high returns with little to no risk. If a company guarantees consistent profits, especially in a volatile market like cryptocurrency, it’s a major red flag.

Lack of Transparency About the Mining Facility, Hardware, or Energy Usage
A genuine cloud mining company should provide clear and detailed information about their mining operations, including the location of their data centers, the type of hardware they use, and the energy costs involved in the mining process. Scammers, however, often provide vague or no details about their operations, making it difficult for investors to verify if any mining is actually taking place. Without transparency, it’s nearly impossible to confirm whether your funds are being used for mining or simply being funneled into a scam.

Vague or Nonexistent Company Information
Legitimate cloud mining companies have established reputations, with clear contact details, company ownership, and a verifiable history. If the company you’re considering lacks basic information—such as who owns it, where it’s based, or any historical background—it’s likely a scam. Scammers often hide behind anonymity or provide false identities to avoid detection, making it hard for investors to hold anyone accountable once the scam unravels.

Inability to Withdraw Funds After Investing
One of the most telling signs of a cloud mining scam is the difficulty or outright inability to withdraw your funds. In the early stages, scammers may allow small withdrawals to build trust. However, as time goes on, investors often encounter excuses for why they can’t access their funds. You may be asked to pay additional fees, taxes, or charges to release your earnings, but the withdrawals never materialize. Once the scammers have enough of your money, they disappear, leaving you with nothing.

Can Cloud Mining Be Legitimate?

While the majority of cloud mining companies are scams, some services known as “colocation mining” allow you to rent space and power for your own mining hardware. However, these are rare, and due diligence is essential.

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Disclaimer: All content in this guide is intended for educational purposes only and should not be interpreted as financial advice. As an individual, you are entirely responsible for how you conduct your investments and manage your cryptocurrency interests. It is exclusively your own responsibility to perform due diligence and Cryptocurrency NZ recommends taking extreme care and caution with crypto and are not responsible for the outcomes, management, or oversight of your activities.