“Crypto” is certainly a financial buzzword these days. But what IS cryptocurrency, exactly? What should you be on the lookout for?
We’ll lay out the truth about crypto and arm you with all the knowledge necessary to avoid crypto fraud, should you choose to invest.
According to the Federal Trade Commission, cryptocurrency is “a type of digital currency that generally exists only electronically. You usually use your phone, computer, or a cryptocurrency ATM to buy cryptocurrency.” Bitcoin is the most well-known type of cryptocurrency, but there are many other kinds, and new ones continue to be created.
Even though crypto has been a hot investment for a while now, there’s still quite a bit of mystery surrounding it, and scammers are ready and waiting to take advantage of that. Crypto scams are particularly bad because the digital currency isn’t subject to regulations or government oversight, and once a crypto transaction occurs it cannot be undone. Another thing to remember is that cryptocurrency values fluctuate all the time due to a variety of factors.
Below are descriptions from the Federal Trade Commission of scams and how they’re perpetrated. Keep in mind that there likely will be overlap in the channels and techniques used. Earning the victim’s trust is the key to pulling off a scam. Scammers may use social media channels, dating apps, or professional networking sites to promote themselves as highly successful financial advisors.
Social Engineering Scams
Phishing, romance, tech support, grandparent, organization, or alleged government agency insists on payment via cryptocurrency.
Social Media
Any tweet, text, email, or message on social media that asks for cryptocurrency. Examples: A friend makes contact on social media, claiming they are caught up in an emergency and need immediate rescue, but only through cryptocurrency.
A celebrity or famed cryptocurrency investor is sponsoring a cryptocurrency investment or giveaway.
Investment Opportunities
Promised big payouts with guaranteed returns for a small investment in a specific cryptocurrency.
Investment Managers
Unsolicited offers from investment managers who promise to grow money if cryptocurrency is sent to an account or digital wallet they control.
Pyramid Scheme
Become an investor in a program through which, rather than making money off any actual instrument (such as the rising value of bitcoin over time), you make money off the subsequent investors who follow you into the investment.
Unsolicited Job Offers
These offers help recruit investors to sell or mine cryptocurrency or help convert cash to bitcoin. They’ll also list phony jobs on employment websites where they promise you a new job (for a fee) but wind-up stealing money or personal information instead.
Blackmail
Emails are sent to targets, falsely claiming to have compromising photos, videos, or embarrassing information about them. They threaten to go public unless the victim pays up via cryptocurrency.
We want to now give you a real-world fraud scenario that happens with cryptocurrency. After being contacted by a crypto-peddling fraudster and trust has been established, the phony advisor states that they have set up an account. They show the victim a screenshot of the account that supposedly was set up in their name. The victim then transfers money into the account that’s not really theirs. The account is really the scammer’s, so once the transfer has been made, the scammer withdraws the money, leaving the victim at a loss with no way to retrieve their money.
Our advice is to proceed with extreme caution with any investment opportunity. It’s easy to get caught up in the excitement, especially with a skilled fraudster saying all the right things to gain your trust. The only person who should be setting up any financial account is YOU!
If you come across or fall victim to cryptocurrency fraud, it’s important to report it. Here’s what you can do. Report fraud and other suspicious activity involving cryptocurrency to:
The FTC at ftc.gov
The Commodity Futures Trading Commission (CFTC) at gov/complaint
The U.S. Securities and Exchange Commission (SEC) at gov/tcr
The Internet Crime Complaint Center (IC3) at gov/Home/FileComplaint
The cryptocurrency exchange company you used to send the money
Cryptocurrency is a form of investment growing in popularity but doesn’t come without concerns.
Exercise extreme caution when investing in cryptocurrencies.
Familiarize yourself with the types of fraud attempts that can occur when dealing with cryptocurrency.
A common con is a “financial advisor” who says they set up an account in your name.
Report any suspected or actual crypto fraud to the proper authorities.
PSECU works hard every day to keep your money safe. We seek to minimize the impact of fraud by promoting anti-fraud awareness and education as a part of our larger commitment to providing you with financial tips and tools to help you achieve more. By focusing on cryptocurrency fraud, we aim to demystify this emerging currency and help you avoid scams and fraud.