Scammers get away with millions. Don’t make it easy for them.
It’s not just cryptocurrency prices that have been on the rise lately – cryptocurrency scams are on the rise, too. Americans lost more than $80 million in cryptocurrency scams between October 2020 and April 2021.
According to figures from the Federal Trade Commission (FTC), more than 7,000 people reported losses – about 12 times more than the same period the previous year. The average loss was $1,900, with people in their 20s and 30s worst affected. These age groups lose out to investment scams more than any other type of scam.
Why do people lose so much money?
In some ways, the current environment is a perfect storm for scammers. Here are some of the reasons.
Many people do not fully understand cryptocurrency
This learning curve makes it easy for smooth-talking scammers to deceive potential investors through crypto-currency gossip. The greater the gap in understanding, the easier it is for criminals to take advantage of unsuspecting people. Blockchain technology is evolving all the time, so there is a lot ahead for investors to keep up to date.
Huge price jumps
The massive cryptocurrency price hike we saw at the beginning of this year, along with several headlines about crypto millionaires, fueled two things: the fear of getting lost and the expectation of big profits. As phenomenal returns on ordinary investments would be surprising, it is believable in cryptocurrencies because many cryptocurrencies have made significant gains in just one year.
There is less consumer protection in cryptocurrencies
If you are investing in the stock market, you have a certain level of security because companies and stockbrokers have to adhere to strict regulations. However, in cryptography, it can be difficult to distinguish between real companies and fake ones.
How to Avoid Cryptocurrency Scams
The primary way to avoid cryptocurrency scams is to treat cryptocurrency like any other investment or purchase. Just because something uses the word cryptocurrency or Bitcoin, it doesn’t make it a magical profit source.
There are a number of ways crypto scammers can steal your money. People create fake cryptocurrency exchanges, and as soon as the investors sign up and transfer their money, they discover that they cannot withdraw it. Likewise, people promote counterfeit coins to raise the price and then cash out before the value drops to nothing. This is often called a pump and a dump.
Here are some ways to protect yourself from scams.
Search, search, search
Take the time to fully understand which cryptocurrency you might buy. Look at the management team, what problem encryption promises to solve, whether they have offices (and where they are based), and what the competitive environment is. Likewise, do your due diligence on any cryptocurrency exchange or broker you plan to use.
Use reputable platforms and exchanges
There are hundreds of cryptocurrency exchanges, but only a limited number are licensed to operate in the United States. If an exchange promises that you can earn interest on your coins, make sure you understand how to fund that interest. For example, find out if the exchange is lending your coins or accumulating them and paying you rewards.
Review URLs carefully
Another common scam is imitating popular cryptocurrency websites or apps. You are then tricked into transferring your coins or money to a fake site. Bookmark sites you use regularly and pay special attention to URLs. For example, pay attention to the letters converted to numbers – like the letter “l” for the number “1” or the letter “O” for the number “0”.
Beware of celebrity endorsements
Celebrity endorsements can be suspicious because we don’t know if a person got paid to promote that coin. In addition, impersonators have also made a fortune. For example, the Federal Trade Commission (FTC) reports that people have paid more than $2 million to Elon Musk impersonators in the past six months or so.
Never give out your passwords or cryptocurrency keys to anyone
Just as you wouldn’t give your bank PIN or email password to a stranger, you should also suspect that anyone is asking for your passwords or encrypted keys. The key to your cryptocurrency is like a bank PIN – a code that only you can access.
What do you do if you are cheated?
Realizing that you have been cheated on is a horrific feeling. If that happens, the stats above show you’re not alone. These criminals have developed sophisticated ways to steal your money. It can be difficult to get your lost crypto cash back, but here are some steps you can take:
- Contact your bank or cryptocurrency exchange. If you make it clear that the transaction was fraudulent, you may be able to reverse it, especially if you paid with a debit or credit card.
- Protect your identity. If you share any personal information, you may need to take steps to prevent further fraudulent activities. Go to Identtheft.gov to report what happened and find out, for example, how to freeze your balance and prevent fraudsters from opening accounts in your name.
- Connect with a cyber investigator. Companies like CipherTrace can help you track down stolen funds and, in some cases, will offer you free assistance. You will need to provide transaction identifiers and other information about the scam.
- Report it to the FTC. Make sure scammers don’t get more money from anyone else by reporting fraud to the FTC. You can also get advice about other options available to you.
As cryptocurrencies become more popular, we can expect to see an increase in consumer protections — and hopefully, scams to decrease. In the meantime, remember that there are people out there trying to scam you out of your hard-earned money, so do your best to stay updated on how to protect yourself and your investments.
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