Bitcoin. Ethereum. Dogecoin. These are just a few of the thousands of so-called cryptocurrencies that have emerged in recent years as a medium for the exchange of goods and services. These currencies rely on blockchain technology, essentially a digital ledger where all transactions involving a virtual currency are stored. Cryptocurrencies are not government-regulated currencies the way that U.S. dollars, euros, yen, or pounds sterling are. However, they are increasingly being used by everyday consumers and, unfortunately, scammers.
Due to the nature of peer-to-peer currency transactions, fraud is becoming more common within cryptocurrency markets. According to the Federal Trade Commission, 7,000 complainants have reported losses of more than $80 million due to cryptocurrency investment scams since October 2020. According to the FTC, consumers aged 20-49 are five times more likely to report losing money on investments in cryptocurrency than older age groups.
“Mario,” a consumer from California who recently contacted Fraud.org, is typical of the complaints we are receiving. “I did my first investment of $625.00 in Bitcoins, then I did an additional investment of $12,2000 using Bitcoins, and I was supposed to receive my profit the next month,” wrote Mario. “When I was trying to complete my profit withdrawal, the system came in with an error. After that, I tried to contact the cryptocurrency company without any response or success.”
Cryptocurrencies’ instantaneous transactions, global reach, and relative anonymity have resulted in them being used as a payment method in many fraud cases such as giveaway scams, imposter websites, and phishing emails. Giveaway scams occur when accounts posing as celebrities promise to immediately multiple the money you invest in cryptocurrencies. People are often lured to websites that look like opportunities for investing or mining cryptocurrencies, offering larger returns for larger investments. Initial coin offerings (“ICOs”), the first offerings on a particular cryptocurrency for sale, are often vehicles for fraud, used to hack investors’ crypto-wallets and steal their legitimate cryptocurrencies.
Reduce your risk of falling victim to cryptocurrency fraud. Here’s how:
- Remember the old adage: If it sounds too good to be true, it usually is. Be skeptical of websites and people promoting large returns on investments. Don’t trust offers that come from messages or posts on social media websites. If someone is asking for even a small amount of your cryptocurrency, it is likely a scam. Never send cryptocurrencies to giveaways or online prize promotions. Be aware that such requests may come under the guise of identity verification.
- Be protective of your personal information. Never give out your two-factor authentication security codes or passwords. Never give support staff remote access to your machine, as this provides them with full access to your computer and online financial accounts.
- Research. Verify that email addresses are legitimately connected to the cryptocurrency company. If there isn’t a small lock icon indicating security near the website’s URL bar, think twice. Double-check the website’s URLs to ensure that you’re visiting a trustworthy website. Look into any entity soliciting you on social media. Contact the company if you have any doubts.
If you or someone you know has been a victim of a crypto scam or any other type of fraud, we urge you to file a complaint at Fraud.org via our online complaint form.