Cryptocurrency Scams on the Rise - What You Should Know
According to a report published by the Federal Trade Commission in May 2021, just under 7,000 people reported losing over $80 million to scammers in cryptocurrency investment schemes between October of 2020 and the date the report was prepared. The report goes on to state that victims from 20 to 30 years of age suffered cryptocurrency losses of $35 million in these scams. That's more than any other age group. Investment scams are just one of many attack vectors cybercriminals use to defraud their victims in transactions involving digital currency.
If you invest in cryptocurrency or are considering doing so, the more you know about how digital currency works and the scams that are being perpetrated, the less likely you are to become a statistic.
Cryptocurrency is intangible. Unless you do business with an entity that allows you to "cash it in" for some physical alternative like a token, you can't physically touch it. Typically, it is stored in a virtual wallet that may reside locally on your computer, on an external drive, or online. You can purchase digital currency through online exchanges or engage in a process called "mining," which is a complex process that is beyond the scope of this article.
Some people buy cryptocurrency to hold as an investment. Others like using it as a payment method in online transactions. There are no bank transaction fees involved, and those who use it enjoy a higher degree of anonymity. Although saving on fees is a plus, there are some inherent disadvantages. When you do business with a bank, your deposits are insured. If your digital wallet is compromised, you forget your login credentials, the exchange with which you do business disappears, or you get scammed, you'll likely find that there is no one who can help you and no way to recover your losses.
The anonymity factor is one reason cybercriminals prefer being paid in cryptocurrency when they engage in fraudulent activities and ransomware attacks. Anonymity makes it more difficult to track them down. If you become involved in a transaction with someone who insists that you pay using cryptocurrency, a gift card, or via wire transfer, you're most probably dealing with a scammer and should terminate the transaction immediately.
Cryptocurrency investment scams
Scammers attempting to convince their targets to invest in their cryptocurrency schemes often promise big returns. They may even offer guarantees. They are, however, frequently unable to provide any substantive details or answer any questions about how their "business" operates.
Some build malicious websites that appear to be legitimate. They may even pay to ensure that their sites are among the top search engine results returned when certain keywords and phrases are used.
These cybercriminals may post fake celebrity endorsements or offer to enter their potential victims into contests that will supposedly multiply the number of their cryptocurrency investments if they win. Others even tug at the heartstrings, creating fake profiles at online dating sites where they locate lonely targets, establish relationships, and con their victims into making bogus investments once they've earned their trust.
Scammers are also posing as "trusted financial advisors" who have nothing but their targets' best interest in mind as they direct them to invest their cryptocurrency in diverse portfolios of non-existent assets. When their victims attempt to log into these portfolios, they find that they don't exist and their investments cannot be withdrawn.
Even the old pyramid scheme has been revived by these cyber-crooks. Victims are convinced to invest their cryptocurrency into some fake asset, which then gives them the "privilege" to recruit new investors into the program. They're told that, for every new investor they bring in, more cryptocurrency will be added to their portfolios. How much more will be added depends on how much they have deposited, thus they are convinced to invest more to receive greater rewards for recruitment. There are, of course, no portfolios, and their investment vanishes.
Other scams involving cryptocurrency
Some scammers are luring in their targets with unsolicited job offers. They may even submit fake job postings to online employment sites. They advertise for temporary help, perhaps offering a week of work assisting with the selling or mining of cryptocurrency. They then end up either taking money from their victims or stealing their personal information before disappearing.
Cybercriminals also incorporate social media into their scams. If you receive a message via social media requesting that you send cryptocurrency, don't do it. The message may even appear to be from someone you know or follow, but those accounts can be hacked. Social media providers appreciate it when their subscribers notify them about messages of this type so that they can be investigated and accounts can be shut down if needed.
By now, you've probably heard of, or may even been the target of, a form of sextortion scam wherein an attacker targets a potential victim with emails claiming to have compromising photos or some proof that the person frequents porn sites. The scammer threatens to share that information with the target's spouse or employer unless they receive payment via cryptocurrency, a gift card, or a wire transfer. The attacker may even claim to have compromised the victim's computer or email account and may provide, as evidence, a password the victim might have actually used at some point. The password was probably leaked after a previous data breach and may have been tied to the target's email account, thus facilitating the attack. If you receive a sextortion email, delete it, block the sender, and, if the scammer sent a password that you're still using, change it immediately and never use it again.
These are but a few of the current variants. There will undoubtedly be more to come.
If you are considering investing in cryptocurrency, do your research. The FTC recommends that, once you have identified an exchange with which you are considering doing business, you should search the name of the exchange and include the keywords "review," "complaints," and "scam" in the search strings. Read through enough results to either make you feel comfortable with your choice or to convince yourself look for a different exchange.
Avoid doing business with anyone promising guaranteed big returns on investments. Don't fall for fake celebrity endorsements. If anyone insists that you pay for goods or services using cryptocurrency, gift cards, or wire transfer, the FTC in no uncertain terms says it's a scam - don't do it. If you do, there is a high probability that you will never recover your investment.
In its May 2021, report (available for your review at consumer.ftc.gov/blog/2021/05/spotting-cryptocurrency-investment-scams), the FTC plainly states, "You'll make money if you're lucky enough to sell your crypto for more than you paid. Don't trust people who say they know a better way."