Cloud mining services do not have the best of reputations in the world of Bitcoin and virtual currency. Most of these cloud mining companies have been struggling to make ends meet, which can be partially blamed on the low Bitcoin price. On the other hand, there have been quite a few cloud mining services who have turned out to be Ponzi schemes. It looks like Scrypt.cc has deliberately made some wrong moves to defraud customers in the past few days.
Also read: XScrypt Cloud Mining Provider Shows True Ponzi Colors?
Disclaimer: The views expressed are those of the author and not necessarily those of Bitcoinist.
Scrypt.cc – Recovering From a Hack and Loss of 3,500 BTC
Most people were not surprised when Scrypt.cc announced their platform got hacked a few months ago. Cloud mining companies attract a lot of attention from investors, but also from hackers and people with less than honorable intentions. With the platform keeping a large portion of funds in their hot wallet, it was only a matter of time until somebody tried to hack Scrypt.cc.
Push came to shove in June of 2015 when the announcement was made regarding a breach of the Scrypt.cc hot wallet. Nearly 3,500 Bitcoins, nearly all of which belonged to the company itself. All in all, very little customer funds was missing, which came as a bit of a surprise. Then again, storing such a large amount of non-refundable funds in a wallet that is connected to the internet at all times, might not have been the smartest business decision.
However, the Scrypt.cc customers were affected in a harsh way because of this stolen funds. Mining earnings were reduced by as much as 80% for an extended period, which would allow Scrypt.cc to recoup some of their losses as well. Rather than chalking up the hack as a loss, the cloud mining platform owners decided to take funds from paying customers to fill up their own pockets again.
With mining earnings reduced by such a large amount, most Scrypt.cc users started selling off their cloud mining power and recoup any amount of funds they could. Doing so led to a crash of the price per kh/s, nearly crashing the entire market. This was to be expected, of course, as there was no sign of improvement in terms of mining earnings.
To this very day, the mining earnings are still drastically reduced, to great chagrin of the Scrypt.cc users. But that is not the worst part, as it seems like the platform owners have taken matters into their own hands by draining customer balances in exchange for nearly worthless mining hashpower. Hardly any of the Scrypt.cc customers have noticed this up until now, even though the draining of Bitcoin balances started as early as a few days ago.
Turning On Auto Invest Without Customer Consent
Earlier this week, a few Scrypt.cc customers noticed nearly an entire day had gone by without receiving mining payouts. Such an event is quite odd, considering Scrypt.cc pays out a small amount of earnings every 10 minutes. Fortunately, the matter resolved itself the next business day, and payouts were trickling in again at a frequent pace.
It seems as if this change spelled the doom of Scrypt.cc as well. From that day forward, all customers account suddenly had “Auto Invest” enabled, without asking for the account owner’s consent to do so. Enabling this feature means that existing Scrypt.cc customers will buy additional mining hashpower at the cheapest possible price, and funds will be taken from their existing Bitcoin balance.
There has been no email communication or notice regarding this change, but we can confirm that multiple users have been affected by this issue. As a result, most users are left behind with nearly empty Bitcoin balances and find themselves owning a lot more [useless] hashpower than they did before.
To make matters even worse, there are no buy orders left on the Scrypt.cc order book right now. The average price per kh/s has bottomed out to 100 Satoshi and is expected to go even lower once users start liquidating their redundant hashpower. Sell orders are still being executed and are filed by unsuspecting buyers whose accounts are still set to “Auto Invest”.
Withdrawals To Be Processed or Not?
The big question now is whether or not any outstanding withdrawals will be processed by Scrypt.cc. Most people will have little to no Bitcoins left to withdraw, but there will be quite a few people who still have outstanding withdrawals. According to Scrypt.cc policy, all withdrawals are processed manually and should be honored within 24 hours, and we will keep an eye on the situation as events unfold.
All signs point towards Scrypt.cc being the latest in a long list of cloud mining companies to turn into a massive Ponzi scheme. Ever since mining rewards were reduced by 80%, things were looking grim. The company has never managed to recover from this setback, and it looks like the end is very near for Scrypt.cc.
Disclaimer: The views expressed are those of the author and not necessarily those of Bitcoinist.
Are you a Scrypt.cc customer, and if so, did you have any outstanding Bitcoin balance in your account? Have funds started to disappear slowly? Let us know in the comments below!
Source: Scrypt.cc Account
Images courtesy of Scrypt.cc, Shutterstock, Cryptbond