Cryptocurrency is quickly becoming a hot new trend in investing, but unfortunately many people don't understand how the digital payment system works, which has created a breeding ground for a variety of scams.
Better Business Bureau (BBB) performed a recent investigative study into cryptocurrency, looking at the many facets of the digital payment and the variety of ways criminals are exploiting it to steal from investors and other victims of common scams.
Cryptocurrency is a form of digital money where encryption technology can enable anyone anywhere to send and receive payments. It exists as lines of computer code that are stored in a "crypto wallet." "Bitcoins" were developed in 2009 and have become the most popular form of cryptocurrency.
Cryptocurrency is attractive to scammers because it is relatively unregulated and difficult to recoup once it's lost. In 2021, BBBs received more than 2,400 complaints and 1,200 reports to BBB Scam Tracker that represent more than $15 million in losses. The numbers represent a tripling of cases in the past three years, and a tripling of losses in just the past two years. Cryptocurrency scams also accounted for the second highest type of scam losses reported to the Federal Trade Commission (FTC) in 2021 at approximately $750 million.
Here's a common example of the type of report BBB has seen from victims of investment scams involving cryptocurrency:
A consumer told BBB that she began learning about Bitcoin investing in the summer of 2021, reaching out via WhatsApp to an investing service she saw mentioned repeatedly in the comments of a YouTube video about Bitcoin. The woman was instructed to buy $1,500 in Bitcoin via CashApp. Ten days later, she received a screenshot displaying an account balance of more than $7,300. However, when she decided to withdraw her earnings, she was told to pay a 10% commission and a broker's fee of more than $800. After she paid both, she received an email instructing her to pay an additional sum of nearly $1,200 to withdraw her money. At that point she determined it was a fraud and reported it to BBB.
BBB and FTC have both found that many reported cryptocurrency fraud cases started with opportunities posted on social media. Several people have indicated that scammers impersonated a friend to tell them about their success in crypto investing or made Facebook posts promising big gains.
Cryptocurrency has not been limited to investment schemes. It has started to appear in other common types of frauds, including romance scams, ransomware scams, fraudulent online sales, advance fee loan scams, employment scams, extortion scams, government impostor fees, and more.
Tips to avoid cryptocurrency scams:
Guard your "wallet." If you buy cryptocurrency, the security of the wallet is of prime importance. If you lose the key, then your funds are gone permanently.
Look carefully at email addresses and website addresses. Phishing scams often try to trick people into logging in and then capture the log in credentials. Those then can be used to steal money. Looking for an exchange with an internet search engine may lead to fake sites which advertise and impersonate real companies. Be especially careful when viewing these on a phone.
Do not pay for products with cryptocurrency. Be careful if someone asks you to pay with Bitcoin or another cryptocurrency. No one with the government will ever ask for this form of payment.
Beware of fake recovery companies. Some scammers will victimize twice by calling and claiming to be a company that can help recover stolen money – for a fee.
Watch out for fake reviews. Scammers often create fake reviews for their own companies.
Be wary of celebrity endorsements. It can be tempting to rely on a prominent figure who has invested in cryptocurrency. But those endorsements are often not authorized and even if they are, the celebrity may be paid for the effort and may not know more about it than you do.
Be careful about claims made on social media. This is the most common place for people to encounter investment scams.
Be wary of "friends" who reach out to you on social media and tell you how they made money with cryptocurrency. Accounts are frequently compromised. Call your friend by phone to see if it is really them.
Only download apps from Google Play or the App Store. Trusted app stores do not eliminate the threat of app scams, but they do offer a basic level of protection. Be careful with apps as some contain malicious software.
Do not believe promises of guaranteed returns. No one can guarantee how an investment will perform.
Seek help and support. Cybercrime Support Network offers a free, confidential support program for romance scam survivors.
Where to report a scam or register a complaint:
* Better Business Bureau - file a complaint with your local BBB at BBB.org if you lost money or report a scam online at BBB.org/scamtracker.
* Federal Trade Commission (FTC) - file a complaint online at reportfraud.ftc.gov or call 877-FTC-Help.
* Internet Crime Complaint Center (IC3) - file a complaint online at ic3.gov/complaint.
* U.S. Securities and Exchange Commission - you can file a complaint at SEC.gov/tcr.
Michele Mason is president of the Better Business Bureau in Chattanooga.