What You Need to Know About Cryptocurrency Scams (2024)
Cryptocurrenciessuch asBitcoin, Ethereum, Solana and hundreds moreare hot commodities in online trading, and it’s possible for an investor to make a profit. But many people have experienced dramatic losses, some through bogus investment platforms touted by scammers as sure moneymakers.
The Federal Trade Commission (FTC) warns consumers that “crypto investing comes with lots of risks, including scams.”
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This virtual money isn’t backed by any government or central bank. Even so, you can use crypto to buy goods and services, exchange it for U.S. dollars and other conventional currencies on digital markets, and even obtain it at specialized ATMs.
But unlike the value of government-backed money, that of virtual currencies is driven entirely by supply and demand. This can create wild swings that produce big gains for investors — or big losses. And crypto investments are subject to far less regulatory protection than traditional financial products like stocks, bonds and mutual funds. Meanwhile, those crypto ATMs are favored by criminals for their anonymity and general lack of oversight.
Cryptocurrency fraudhas taken a quantum leap in recent years. The FTC says that in 2022, more than 53,000 people reported losing a total of more than $1.4 billion in crypto to scams.
Video: Cryptocurrency Safety
Cryptocurrencies have become a vibrant yet volatile market, with assets like Bitcoin, Ethereum, Solana, and many others gaining immense traction in online trading. This popularity stems from their decentralized nature, enabling peer-to-peer transactions and offering potential profits for investors. However, the industry is rife with risks, notably due to scams that have led to substantial losses for unsuspecting individuals.
The Federal Trade Commission (FTC) has been vigilant in warning consumers about the risks inherent in crypto investing, especially due to the prevalence of fraudulent investment platforms promising lucrative returns. As of the latest available data, the FTC reported over 53,000 people losing more than $1.4 billion to crypto-related scams in 2022, showcasing the scale of the issue.
It's crucial to recognize that cryptocurrencies lack the backing of any government or central bank, setting them apart from traditional currencies. Despite this, their utility extends to purchasing goods and services, conversion to conventional currencies on digital markets, and even accessibility through specialized ATMs. However, the value of these digital assets is solely determined by market demand and supply dynamics, leading to erratic fluctuations that can either yield significant gains or substantial losses for investors.
One of the notable differences between cryptocurrencies and traditional financial products lies in regulatory oversight. Crypto investments are subject to far fewer regulations compared to conventional stocks, bonds, or mutual funds, leaving investors with minimal protection against market volatility and fraudulent activities.
The accessibility and anonymity associated with crypto ATMs have unfortunately made them a favored tool for criminal activities, exacerbating the risks for individuals engaging with these machines.
Cryptocurrency fraud has undeniably escalated in recent years, posing a substantial threat to investors. The exponential increase in reported losses to scams, as highlighted by the FTC, underscores the urgency for cautious and informed participation in the crypto market.
The concepts covered in the article involve:
Cryptocurrencies: Digital or virtual currencies like Bitcoin, Ethereum, and Solana, operating on decentralized networks and lacking government or central bank backing.
Investment Risks: The volatile nature of cryptocurrency markets leading to potential profits but also substantial losses, especially due to scams and fraudulent schemes.
Regulatory Differences: Contrasting the regulatory landscape between cryptocurrencies and traditional financial products like stocks, bonds, and mutual funds, emphasizing the lower protection for crypto investors.
Utility and Accessibility: Despite lacking centralized backing, cryptocurrencies can be used to buy goods/services, exchanged for conventional currencies on digital markets, and accessed via specialized ATMs, though these ATMs pose risks due to anonymity and minimal oversight, attracting criminal activity.
Crypto Fraud and Scams: Highlighting the alarming increase in crypto-related scams, as evidenced by the significant number of reported losses, emphasizing the need for caution and awareness when engaging in cryptocurrency investments or transactions.
Each concept reflects the multifaceted nature of the cryptocurrency landscape, spanning its potential benefits, risks, regulatory challenges, utility, and susceptibility to fraudulent activities.
No legitimate business or government will ever email, text, or message you on social media to ask for money. And they will never demand that you buy or pay with cryptocurrency. Never click on a link from an unexpected text, email, or social media message, even if it seems to come from a company you know.
RED FLAG: Loan offers, excessive margin, or matching funds
Remember, you can't get something for nothing. Criminals make these offers to encourage you to add more money to your account. They will also show you fake gains and balances to keep you contributing.
Investing in a new coin is inherently risky as most coins have no real value. Investment fraud involving cryptocurrency, such as ICOs, rose by nearly 200% from $907 million in 2021 to $2.57 billion in 2022, according to the FBI's annual Internet Crime Report.
If you're told to pay with cryptocurrency, it's most likely a scam. Credible institutions won't force you to pay with cryptocurrency. Don't click on any links or attachments from suspicious emails, text messages or social media. Don't feel pressured to invest quickly.
Yes, it is possible to recover scammed cryptocurrency with legal action. However, it's essential to understand that crypto scam recovery services are not included in cryptocurrency tracing, which aims only to identify payment paths on the blockchain.
Look for an up-to-date and credible fake cryptocurrency list to check for scams. Is it too good to be true: Companies that promise guaranteed returns or to make you rich overnight are likely to be scams. If something seems too good to be true, tread carefully.
Did you pay with cryptocurrency? Cryptocurrency payments typically are not reversible. Once you pay with cryptocurrency, you can only get your money back if the person you paid sends it back. But contact the company you used to send the money and tell them it was a fraudulent transaction.
A conviction under the false pretenses statute could result in anywhere from 60 days in jail to 30 years in prison and $500 to $10,000 in fines depending on the amount in controversy. Impersonation - the perpetrator pretends to be someone they are not, impersonating someone who the victim is likely to send money to.
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FTX was a leading cryptocurrency exchange that went bankrupt in November 2022 amid allegations that its owners had embezzled and misused customer funds. Sam Bankman-Fried, the CEO of the exchange, was sentenced to 25 years in prison and ordered to repay $11 billion.
While getting a refund after losing money to scammers is possible, the outcome depends on factors like bank policy, the type of scam, the amount lost, and how quickly the scam was reported. According to US federal law, banks must reimburse you for unauthorized transactions.
Reporting Cryptocurrency and Digital Asset Investment Scams
If you have been defrauded of funds through a cryptocurrency investment scam, please contact the Secret Service at [email protected] . For all other crimes involving the use of cryptocurrency, contact your local Secret Service field office.
A legitimate broker should provide clear and accessible contact information, including a physical address, a working phone number, and a responsive email. Avoid brokers with vague contact details or only a P.O. box, as this could indicate a lack of transparency or legitimacy.
Irregular patterns relating to the size, frequency, or type of crypto transactions may be red flags pointing to money laundering activity, including: Customers making several high-value transfers within a short amount of time, such as a 24-hr period. Structuring transaction amounts to fall below reporting thresholds.
Unsolicited offers: Don't respond to unsolicited cold calls, emails, junk mail, late-night commercials or infomercials, or social media posts that are either overly attractive or fear-inducing. These are all common tactics scammers use to entice you to engage.
Traders can use a bull flag chart pattern to trade a trending market. For instance, if the cryptocurrency price is trending upward, a buy-stop order can be placed above the high of the flag. If it is moving downwards and the flag violates on the lower side, a sell-stop order can be placed below the low of the flag.
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