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Before asking this question, I should say some words. Because this question seems similar to another question I asked, I worry someone may mark this as a duplicate without understanding - In fact, they were different.

Disclaimer: This is only an educational case. I am neither the scammer, the victim, nor someone scheming to scam.

Let's say, Tom was scammed by a "bitcoin mining website", the website owner, say, Bob, was a scammer.

Suppose that Bob and Tom are all in the US, and are all under the jurisdiction of the US.

Below is how this thing happened:

One day, Tom opened Bob's website while surfing Google. The website said:

"we have a software, which mines bitcoin at a very fast speed - because it uses new technology to mine bitcoin."

"It is more than 1000 times faster than traditional mining."

Tom was allured by the "potential wealth", so he downloaded the software, and went through the setup, and installed that alleged "New Technology Bitcoin Miner".

The software was made by Bob, too. During the setup, there was a window of "terms of use", written by Bob. At the very end of the "terms of use", Bob wrote down this:

Our bitcoin mining service has been already suspended in xx/xx/2019, due to legal and financial reasons. You can still use this software, but it will only work as a simulation, therefore, it will not produce real bitcoin.

Agreement to this term of use means that any payment you make in the software is regarded as payment for the simulation.

However, Tom was too hurry, so he didn't read the tedious "terms of use". He straight clicked "Agree" and installed the software, a/k/a "New Technology Bitcoin Miner".

Then, the software began asking for payment. It said to Tom: If you want to mine bitcoin, you should pay $999 for our service first.

So, Tom paid $999 and started "mining bitcoin" in this alleged "New Technology Bitcoin Miner". The software simulated the mining process. At last, Tom got no bitcoin into his wallet.

(And, in fact, the alleged "New Technology Bitcoin Miner" didn't do real mining at all.)

Tom felt he was defrauded, so he was about to report the website owner, Bob.

My questions:

  • From the perspective of US law, is Bob doing this regarded a fraud?

  • Is this a criminal case, or a civil case?

  • What evidence can Tom provide to support the lawsuit?

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    Not to play word games, but just so I can answer, by scam do you mean defrauding?
    – Putvi
    Nov 22, 2019 at 17:13
  • @Putvi Yes. I mean fraud. I will edit the question.
    – gudako
    Nov 23, 2019 at 1:38

2 Answers 2

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is Bob doing this regarded a scam?

No. Tom has no viable claims and therefore he has no case in civil court (nor is there a criminal case).

Being "at the very end of the 'terms of use'" likely renders Tom unable to justify his unawareness of the disclaimer. That would defeat his claim of breach of contract. When he entered the contract, he knew or should have known about the disclaimer. The disclaimer is an update that renders pay-to-mine directions obsolete, and the disclaimer was presented to Tom first.

Being in a hurry is unlikely to justify Tom's unawareness of the disclaimer unless the circumstances are tantamount to hardship or coercion.

Likewise, Tom will have a hard time proving reasonable reliance, one of the prima facie elements of fraud. It is widely known that nowadays much of "traditional mining" involves technology with which an average computer cannot compete (think of ASIC and specialized hardware).

Moreover, comparisons about the pace of "traditional mining" are meaningless because it is also widely known that the difficulty of bitcoin mining is adjusted periodically (and dynamically) for the purpose of maintaning a somewhat steady rate of speed with which new bitcoins are created.

Thus, Tom's basis for purchasing the software is too naive (that is, for the average aspiring miner of bitcoins) to meet the criterion of reasonable reliance on Bob's advertisement.

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    There was no reason to downvote this. Inaki was 100% correct here.
    – Putvi
    Nov 22, 2019 at 23:00
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    The website itself said "we have a software, which mines bitcoin" and not "we have a software, that simulates mining bitcoins." You can't defeat a fraud claim just by burying a disclaimer in the terms. No reasonable person would pay $999 for a simulation of bitcoin mining. The only way anyone would pay that much is if they wanted to actually mine bitcoin. Also, "It is widely known that nowadays much of 'traditional mining' involves technology with which an average computer cannot compete" - But a claim was made of "new technology".
    – D M
    Nov 23, 2019 at 19:02
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    @DM The contract was formed when Tom accepted the terms of use during installation of the software, not anytime prior to that. Tom could have declined the terms of use and abort the installation, in which case he would be entitled to reimbursement. And the allegations of "new technology" brings us back to the element of unreasonable reliance: It is unreasonable for a person to ignore what he knows --or should know-- about the state of the art every time he sees or hears the cliché "new technology".
    – Iñaki Viggers
    Nov 23, 2019 at 19:51
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    This seems like an adhesion contract, and courts in the US have been willing to declare such contracts unenforceable because of "unfair surprise", that is "The party who drafts the contract includes terms in the contract knowing that those terms are not in line with the other party’s expectations and that the other party will not notice that the terms have been inserted.". This clause at the end of the terms of use seems to fall squarely in this category.
    – Charles E. Grant
    Nov 26, 2019 at 4:56
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    @CharlesE.Grant There is no "unfair surprise" in the adhesion contract as described by the OP. The disclaimer is not located in between clauses, but "at the very end of the terms of use", where users formalize their acceptance of TOU by clicking on an explicit checkbox and/or a button to that effect. Therefore, a customer's allegation that he did not notice the disclaimer would generally fail in court.
    – Iñaki Viggers
    Nov 26, 2019 at 10:20
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A contract can’t legalise illegality

Let’s assume that absent the “simulation” disclosure in the ToS, this would be fraud.

The question then becomes, does making the disclosure make it not fraud?

Fraud requires dishonesty and deception. These are measured by what a reasonable person would determine from the overall conduct so a small piece of truth in amongst a web of half-truths and outright lies is still dishonest and deceptive.

  • From the perspective of US law, is Bob doing this regarded a scam?

No, but only because “scam” isn’t a legal term - it’s slang for fraud and this is fraud

  • Is this a criminal case, or a civil case?

Both

  • What evidence can Tom provide to support the lawsuit?

Whatever he has. However, in practice, these types of fraudsters are rarely ever caught and it’s even more rare for the victim to recover their money. They are usually off-shore in countries with either poor rule of law or which will not extradite their nationals.

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