DualMine Misleading Payouts

Notice: This page is a new case study and some aspects have not been fully researched. Some sections may be incomplete or reflect inaccuracies present in initial sources. Please check the References at the bottom for further information and perform your own additional assessment. Please feel free to contribute by adding any missing information or sources you come across. If you are new here, please read General Tutorial on Wikis or Anatomy of a Case Study for help getting started.

Notice: This page contains sources which are not attributed to any text. The unattributed sources follow the initial description. Please assist by visiting each source, reviewing the content, and placing that reference next to any text it can be used to support. Feel free to add any information that you come across which isn't present already. Sources which don't contain any relevant information can be removed. Broken links can be replaced with versions from the Internet Archive. See General Tutorial on Wikis, Anatomy of a Case Study, and/or Citing Your Sources Guide for additional information. Thanks for your help!

DualMine

DualMine claims that you can invest your money and earn a guaranteed payout through their cloud mining service. While the promised payout is lower than many schemes, this has all the hallmarks of a common ponzi scheme. The CEO has little presence outside of the registration. The returns are "guaranteed". There is no evidence of a real product or service. They don't show any mined blocks. Reviews online indicate that most users are unable to get their invested funds out. Any funds they do get out, come out in the native CRT token, which is nearly impossible to convert into the original coins. It does look like most users of the service are simply out of luck to get their funds.

This is a global/international case not involving a specific country.

About DualMine

Dual Mine is a cloud crypto mining solution that claims to make mining affordable for crypto enthusiasts.

"Multiply your Bitcoin, Ethereum, Litecoin and Dogecoin. Start mining and increase your crypto capital now!"

"Unique product offering the mining of the most profitable cryptocurrencies in the cloud. You can mining one of them or both at the same time. Your hardware is already running and waiting for You!"

"Our service makes mining accessible to everyone. We believe in the future of cryptocurrencies and we love to be part of this growing community. Our dual mining system is suitable for those who are new to the world of cryptocurrencies and looking for easy way to invest money."

"With us You will have more coins tomorrow than yesterday."

"The site says that the company offers a cloudmining service for Bitcoin and Ethereum which are the two foremost coins. However, the company did not provide any visual images of its servers or any hardware."

"Nevertheless, Dualmine has other features that would convince a skeptic that it may be carrying out cloudmining services. Furthermore, its reward is not as outrageous as those of the traditional scam cloudmining services which points to the possibility that this company is genuine."

"According to the website, the founder and CEO of Dualmine.com is Lukasz Borzeszkowski. A background search showed that Borzeskowski shows that he is the Director of Cryptonit Limited that was registered with the Company House on 27 February 2018."

"The Pole gave his address as 20-22 Wenlock Road, London, England, N1 7GU. Cryptonit Limited registration number is 11227919."

The Reality

There are several red flags and potential fraud indicators associated with this company. The CEO, Lukasz Borzeszkowski, lacks substantial information and the company's legal documents are questionable. The profitability claims made by Dual Mine are exaggerated, promising to double investment amounts every year, which is highly unrealistic. Achieving a 100% return on investment in mining is highly unlikely, and users should be cautious of such exaggerated claims. The lack of transparency regarding the mining process, machinery, and mining centers is concerning. The testimonials on their website appear cherry-picked and may not be reliable.

The Scam Bitcoin website advised to stay away from Dual Mine and explore more reliable and transparent mining solutions.

"The office address, 20-22 Wenlock Road, London, England, N1 7GU is an office service address that businesses use as contact when they do not have physical offices in London or want to conceal their real locations."

"Sadly, the investors do not have a clue about the mining process. We do not know the type of machinery they have or the scrypts they use. Moreover, they haven’t shared any details about the location of the mining centres."

"Without knowing the above discussed key factors, it definitely is not worth indulging with their service. Remember, mining is not an easy way to earn money."

"The absence of social presence for the CEO, unprofessional marketing strategy, ease with which they give away hashpower and the fact that the official address used by the company is a virtual office address point to the suspicion that this may be a Ponzi scheme that depends on affiliate referrals for income."

"Dualmine is a scam. They will ask you to invest in valid crypto currency, BUT payout is only made using “Cryptonits” (CRT). A Cryptocurrency they themselves developed. As of today, January 27, 2021… cryptonits is trading at 1CRT = 0.00000039 BTC, which is around $0.012 (at the exchange rate of $31,366.30/BTC."

"[I]t says you can "BTC, ETH DOGE" etc... and it shows on your dashboard, your profit in those currencies. But when i comes to getting paid out, you will find that you can only get paid out in CRT tokens, which is their own currency they created, and youre only allowed to withdraw 3000CRT (about$30US) at a time."

"There is no list of blocks they have mined. They have a page of supposed proofs and they don’t include anything that proves they’re mining? Bitcoin requires bitcoin miners. Where’s proof they have any?"

"If you look at the contract, the required ROI will be around 8 months. And if you take the profit, you have to wait for 2 years and double 3 times your initial capital. You don't get big profits if you deposit a small amount of money."

"But if the deposit is large enough, the benefits can be felt. But I don't recommend it because the risk of investing in cloud mining with a large amount of money is very risky and you have to be really prepared to lose all your money."

“They are real scam; As soon as you invest, they change the rules for you, by making your payouts so small and restricted, then after a short period they make it impossible to collect your earnings at all”.

What Happened

DualMine promised a cloud mining service with strong payouts and in reality their service makes it impossible to obtain any return.

Key Event Timeline - DualMine Misleading Payouts

Date	Event	Description
April 23rd, 2019 12:56:44 AM MDT	Scam Bitcoin Review Shared	The scambitcoin.com website publishes a report including several red flags about DualMine and advises to stay away and explore more reliable and transparent mining solutions. Achieving a 100% return on investment in mining is highly unlikely, and users should be cautious.
January 19th, 2022 10:00:47 PM MST	Bitcoin.com Article Feature	Bitcoin.com reports on blockchain data analytics firm Chainalysis reporting that Indians visited crypto scam websites around 10 million times in the past year. The number was significantly higher in 2020, with Indians visiting scam websites 17.8 million times. DualMine rounds out position 4 in the leaderboard, with others including coinpayu.com, adbtc.top, hackertyper.net, and coingain.app. These five sites alone received 4.6 million visits from India in the past year. Indian authorities have been actively investigating cryptocurrency scam cases, with the Enforcement Directorate seizing assets worth approximately $5 million in a recent alleged cryptocurrency scam involving Morris Coin. Cryptocurrency scams are a major concern for regulators globally, with organizations such as the North American Securities Administrators Association and the U.S. Federal Trade Commission warning about the risks associated with crypto scams.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost is unknown.

Immediate Reactions

“They steal very easily. I deposited some CRT on their site a month ago, but it was not added to my account on the site. No matter how many tickets”.

Ultimate Outcome

The DualMine website was reported by Chainalysis as being top among Indian cryptocurrency users. DualMine rounds out position 4 in the leaderboard, with others including coinpayu.com, adbtc.top, hackertyper.net, and coingain.app. These five sites alone received 4.6 million visits from India in the past year.

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

Indian authorities have been actively investigating cryptocurrency scam cases, with the Enforcement Directorate seizing assets worth approximately $5 million in a recent alleged cryptocurrency scam involving Morris Coin. Cryptocurrency scams are a major concern for regulators globally, with organizations such as the North American Securities Administrators Association and the U.S. Federal Trade Commission warning about the risks associated with crypto scams.

Individual Prevention Policies

Cryptocurrency requires a high degree of diligence in ensuring that any profits are real. Users need to educate themselves and understand ponzi schemes and other frauds. Users should demand proof that all platform assets are properly backed.

Any time that you are promised any profit or benefit in exchange for an initial payment, smart contract approval, or deposit, pay special care as to whether the entity making that offer is trustworthy, actually who they say they are, and has the means to fulfill what they're promising. There are no magic algorithms providing guaranteed returns from trading or mining. Trading on average will lose money. Mining is expensive and complex. No one is going to immediately send back more than you sent them. NFT projects will rarely announce a surprise mint in only a single location. Are you fully prepared for the event your money is kept and nothing is delivered in return?

When using any third party custodial platform (such as for trading), it is important to verify that the platform has a full backing of all assets, and that assets have been secured in a proper multi-signature wallet held by several trusted and trained individuals. If this can't be validated, then users should avoid using that platform. Unfortunately, most centralized platforms today still do not provide the level of transparency and third party validation which would be necessary to ensure that assets have been kept secure and properly backed. Therefore, the most effective strategy at present remains to learn proper self custody practices and avoid using any third party custodial platforms whenever possible.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Do not take customer assets and performing highly risky trades and investments without giving visibility to customers.

All aspects of any platform should undergo a regular validation/inspection by experts. This validation should include a security audit of any smart contracts, reporting any risks to the backing (of any customer assets, ensuring treasuries or minting functions are properly secured under the control of a multi-signature wallet, and finding any inadequacies in the level of training or integrity of the team. The recommended interval is twice prior to launch or significant system upgrade, once after 3 months, and every 6 months thereafter. It is recommended that the third party performing the inspection not be repeated within a 14 month period.

All wallets, minting functions, and critical infrastructure should be implemented with a multi-signature requirement, with a recommended minimum of 3 signatures required. This means that making important changes or approving spending will require the keys held by at least 3 separate individuals within the organization to approve. The multi-signature should be implemented at the lowest layer possible, all key holders should have security training, and all key holders should be empowered and encouraged to exercise diligence.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

The primary strategy to prevent this situation is improved user education, so users can identify and understand how scams work.

Create a standard tutorial and quiz for all new cryptocurrency participants, which is required to be completed once per participant. This tutorial and quiz should cover the basics of proper seed phrase protection, strong password generation, secure two-factor authentication, common fraud schemes, how to detect and guard against phishing attacks, how ponzi schemes work, as well as other risks which are unique to the cryptocurrency space.

Requiring third party validation of all platforms would uncover fraudulent platforms who are not actually mining and don't have the funds which are claimed for investors. This information can be made publicly available. In the event of users losing funds, there is the potential for the industry insurance fund to reduce the impact of victims.

All platforms should undergo published security and risk assessments by independent third parties. Two assessments are required at founding or major upgrade, one after 3 months, and one every 6 months thereafter. The third parties must not repeat within the past 14 months. A risk assessment needs to include what assets back customer deposits and the risk of default from any third parties being lent to. The security assessment must include ensuring a proper multi-signature wallet, and that all signatories are properly trained. Assessments must be performed on social media, databases, and DNS security.

Set up a multi-signature wallet with private keys held separately by delegate signatories from seven prominent platforms and services within the industry. Establish requirements for contributions by all platforms and services within the country, designed to be affordable for small platforms yet large enough to cover anticipated breach events. Any breach event can be brought forth by a member platform or a petition of 100 signatures for consideration by the delegate signatories. A vote of 4 or more delegate signatures is required to release any funds, which could partially or fully restore lost funds based on their assessment.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.