Crypto is a form of digital coin or currency that is protected by decentralized computer networks. Cryptocurrencies differ from fiat currencies like the US dollar, which are backed by governments and central banks.
Cryptocurrencies are essentially digital money that is kept private. Like previous kinds of currency, cryptocurrency investors perceive it as a store of value and a means of payment or exchange, but without relying on the policies of a central authority. Bitcoin and other cryptocurrencies enable entities connected to the internet anywhere in the globe to send money in minutes, even without a bank or other intermediate. According to Chainalysis, cryptocurrency crime increased by 79 percent to an all-time high in 2021, with bad actors stealing $14 billion in money. Scams using cryptocurrencies easily made up the majority of the total, with stolen monies, largely from cryptocurrency businesses, coming in second.
The dangers that surround cryptocurrency theft
Crypto is a kind of virtual or digital currency that can be used as a form of payment. Owing to the high volatility of the cryptocurrency market, the value of an investor’s holdings fluctuates dramatically. As more people invest their money in cryptocurrencies, fraudsters have taken advantage of the potential to defraud them.
Criminals advertise programs that promise huge returns by investing in or mining cryptocurrencies. Criminals frequently advertise on social media, luring you in with ads promising rapid money in exchange for your money or private details. Fraudsters continue to take advantage of the growing popularity of digital assets to deceive average investors, frequently resulting in catastrophic losses. Cryptocurrencies, coins, and tokens, such as those given in so-called initial coin offerings, are examples of “digital assets” (ICOs). Investors may be less dubious of investment prospects that are novel or “cutting-edge,” or they may be paralyzed by the fear of missing out (FOMO).
Given the growth in price of some digital assets in recent years, some investors may be concerned that they may lose out on a chance to become extremely wealthy. If you’re thinking about investing in digital assets, be sure you know how they function and how much risk you’re taking on. Look for red flags indicating it could be a con.
What is causing a rapid rise in cryptocurrency theft
Digital assets have had a banner year. The cryptocurrency market momentarily reached $3 trillion in November, thanks to increased interest and public acceptance, while leading coins like bitcoin and ether set all-time highs.
However, scammers spotted an opportunity in the buzz. Between January and July, big cryptocurrency thefts, hacks, and fraud totaled $681 million. Decentralized finance, or DeFi, projects were involved in several of the most prominent attacks this year, with more than $10 billion lost to DeFi theft and fraud. Though there is no such thing of a sort as a sure bet, experts advise investors to fully comprehend the dangers associated with cryptocurrencies, particularly DeFi, before investing. When trying to secure your finances, there are a few classic frauds and hazards to be wary of.
Some details about your transactions will almost certainly be made public. Crypto transactions are often referred to as “anonymous.” But the truth is more complicated. The majority of cryptocurrency transactions will be recorded on a public ledger known as a “blockchain.” This is a public list of all bitcoin transactions, both payment, and reception. Details including the transaction amount, as well as the sender’s and recipient’s wallet addresses, might be added to the blockchain depending on the blockchain. It is occasionally feasible to identify the people engaged in a transaction using transaction and wallet information. When you get something from a vendor who gathers additional information about you, such as your mailing address, that information can be used to identify you later.
Payments made with cryptocurrency are not protected by law. If something goes wrong with your credit or debit card, you are legally protected. If you need to dispute a purchase, for example, your credit card company has a procedure in place to assist you in getting your money back. Cryptocurrencies are often devoid of such safeguards.
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Cryptocurrency Scammers Are Targeting EVERYONE!
Criminals are preying on people of all ages, including the elderly, through cryptocurrency-related fraud schemes.
The growing popularity and accessibility of bitcoin are due to advancements in cryptocurrency technology and an expanding number of businesses accepting it as payment. Not only are there a plethora of virtual asset service providers online, but there are also hundreds of bitcoin kiosks around the world that crooks use to assist their operations. Cryptocurrencies are increasingly used to carry out many typical financial crimes and money laundering operations.
Since the beginning of this year, a whopping £146,222,332 has been lost to virtual currency fraud, according to data from Action Fraud, the measurement and reporting center for fraud and cybercrime. This is nearly a third (30%) more than was lost in all of 2020. Action Fraud has received 7,118 allegations of bitcoin fraud since the beginning of the year, with an average loss of a little over £20,000 per victim. The biggest number of reports (11%) came from 18 to 25-year-olds, while over half (52%) of victims were between the ages of 18 and 45.
The use of celebrity endorsements is a popular method of defrauding victims
Criminals will post professional-looking internet advertisements, send emails, and construct websites to promote bogus investment options, including cryptocurrencies. Fake testimonials are frequently accompanied by a photograph of a well-known figure in order to make the investment appear authentic. Action Fraud received 558 investment fraud reports between April 2020 and March 2021, with over three quarters (79%) specifying bitcoin as the commodity they invested in.
How do cryptocurrency theft schemes operate?
Scammers are using tried-and-true fraud tactics, but this time they’re seeking cryptocurrency payment. One of the most renowned ways for scammers to deceive you into buying bitcoin and delivering it to them is through investment scams.
Among other things, scammers impersonate businesses, government agencies, and romantic interests. Threatening emails or letters have been circulating for years, claiming to have access to your personal information or awareness of your “dirty secrets” and demanding payment in Bitcoin to prevent the exposure of this material.
This swindle has taken on a new twist with the introduction of COVID-19.
The letter warns that unless payment is given to a Bitcoin wallet, the writer will reveal your information and infect you and/or your family with coronavirus.
Scammers posing as employers may encourage you to accept a “gift” of money into your personal bank account and deposit it into a cryptocurrency kiosk. The ostensibly “gift” is most certainly money taken from others. Accepting and transferring stolen funds is illegal money mule behavior and may result in unauthorized money transmission.
Paying for Treatments or Equipment that do not exist. Scammers have been found to divert clients from legitimate e-commerce sites touting COVID-19 prevention goods to unrelated and unregulated chat sites that accept cryptocurrency payments for things that do not exist.
They are making use of devious and innovative strategies which we cannot even think of!
To steal a victim’s money, criminals frequently sell fraudulent transactions in “new” and emerging cryptocurrencies, such as an initial coin offering (ICO) or another investment vehicle. The majority of these schemes feature scenarios that appear “too good to be true,” such as enormous monetary returns for a tiny, short-term investment.
Scammers steal investment cash for personal use and use the complexity of bitcoin to conceal the true destiny of the stolen money.
The Common Types of Cryptocurrency Theft Nowadays
Even though it’s a new year, fraudsters are still up to their old tricks… or are they? Yes and no, respectively. Yes, many cyber frauds are the same year after year.
Cybercriminals, like a classic rock band at a concert, don’t simply play the songs; they’re constantly coming up with new ways to attack your data and devices. Here are a few scams that have recently become popular that you should be aware of. You may be familiar with cryptocurrencies if you’re active online, very into finance, or a fan of a specific electric-car-making billionaire. Currency, such as Bitcoin or Eth, is a form of money that employs digital files as its medium of exchange.
The idea that cryptocurrencies are safer than traditional money is a prevalent fallacy
As the popularity of currencies grows, so does the number of scams associated with them. Scams involving cryptocurrency were on the rise in 2021, and we predict this trend to continue into 2022.
Most cryptocurrency scams, like other internet scams, lure you into disclosing personal information, such as the password to your digital wallet. If you hold cryptocurrency or other digital assets, be aware of the warning signs if someone approaches you about increasing your investment.
1. Initial coin offerings scam
An Initial Coin Offering, also known as ICO, is a way of preying on the uninitiated by offering a specific cryptocurrency for sale for the first time. Many ICOs are completely made up, with fake team bios and technical whitepapers plagiarized from other, actual cryptocurrencies.
Each month, dozens of new cryptos are released, and these new tokens and coins are accompanied by a series of initial coin offerings (ICOs). Despite the fact that cryptocurrencies were pummeled in 2018, the interest among a broad pool of investors for these coins has grown. Fraudsters are attracted by all of these causes. After all, if investors are prepared to put money into a highly speculative cryptocurrency, they appear to be just as willing to put money into fraudulent tokens or ICOs.
The notion of making the most of the plethora of new investment opportunities while staying safe from fraudulent ICOs and dodgy coins and tokens might be frightening for the cryptocurrency investor. Even experienced investors may struggle to keep up with the language as the blockchain and cryptocurrency industry grows at a rapid rate. Even the most profitable ICOs and coins have been chastised for relying on speculation. The idea of making a quick gain on an investment in a hot new project is alluring enough to lure both experienced and novice investors into high-risk regions. When looking for new alternative investments in the ICO and cryptocurrency arena, be cautious. Be wary of undertakings that appear to be too good to be true.
Spend time examining every aspect, and consider that the lack of a critical piece of information could be an attempt to conceal an unsound model or concept. Before investing in a project, look for independent sources to verify its credibility, and always ask questions that you can’t find answers to. For investors who have done their studies and are capable of making solid investment decisions, the crypto and ICO spaces offer huge opportunities.
They also contain dangers that can result in big sums of money being lost as a result of scams, frauds, or even legitimate enterprises that are poorly structured and unlikely to thrive. Fraudulent cases are complicated by two aspects. The first is the amount raised, since ICOs that are later discovered to be fraudulent raise nearly four times more money on average. The second characteristic that predicts fraud is if the venture’s code has been made public on GitHub, a platform where entrepreneurs can submit their code for others to check for mistakes. Putting your code on GitHub is seen as a sign of integrity and transparency, which might help you raise more money.
2. Exit thievery
The objective of many ICO issuers is not to develop a business and list it on an exchange but rather to disappear with the money raised. This sort of fraud, also known as exit fraud, is frequently combined with a fake team, in which fictitious individuals are presented as ICO team members.
3. The evolution of pump and dump schemes in the crypto world
“Pump and dump” schemes aren’t new to cryptocurrency, but without the same level of regulation and laws as equities traded on major U.S. exchanges like the NASDAQ, the wild west of finance is rife with fraud and scams, including the famous pump-and-dump fraud.
Pump and dump schemes like this, which are also common in penny stocks, are defined by a limited group of insiders who hold a certain asset – in this case, a digital currency. These low-volatility assets are then publicized, whether through social networking sites, word of mouth, or other means of promotion. Insiders begin to sell or dump the shares at high prices, creating a dramatic sell-off and benefitting at the expense of the deceived masses, when the uneducated investing public rapidly picks up the crypto, which is frequently newly minted with little trading history.
Some members of FaZe Clan, one of the world’s most popular esports organizations, were involved in promoting a new virtual currency, Save the Kids, with a portion of the earnings promised to charity, in one example from June 2021. The new crypto coin dropped in a matter of days, and members of FaZe who were involved in the launch were either punished or dismissed from the group, which distanced itself from their actions. Some investors accused the group of participating in a pump-and-dump scheme, despite the fact that the team member who was fired stated that he had “no bad intent” in promoting the coin.
Crypto may offer a fresh twist on the classic pump and dump plan, in which stock owners strive to push up the market before selling off their holdings at a pre-determined peak. This is typical in the crypto realm at the ICO stage or even later when fraudulent claims can inflate demand and allow the cryptocurrency’s creators or majority holders to make large fictitious gains. In our investigation, fraud in the ICO market does not always come from the firm running the ICO, which we refer to as external fraud. Pump-and-dump scams are another type of fraud. A pump-and-dump strategy occurs when a fraudster artificially inflates the price of a token by providing misleading information in order to sell the token at a higher price.
A “pump and dump” scheme attempts to artificially increase the price of an owned stock by making false, exaggerated, or deceptive positive statements, then selling their stakes once the puffery has resulted in a higher share price. Boiler rooms, which are essentially high-pressure call centers that recruit new investors, have been the term for similar schemes in the past. However, the internet has recently opened up new avenues for reaching big groups of potential investors.
Such agreements are illegal under securities legislation, and they can cause huge losses for investors if stock values fall after the procedure is completed.
4. Ponzi schemes and crypto scams have become one – this is alarming!
Crypto investments can potentially be used as a vehicle for a classic Ponzi scheme, in which new adopters are required to give early adopters fake profits.
Ponzi schemes may use purported investments in burgeoning crypto marketplaces as their intended target. Given how commonly crypto is misunderstood, it can be the ideal cover for a phony operation. A Ponzi is a type of deceptive investment scheme in which the operator pays returns on investments from new investor funds rather than actual investment profits. Ponzi scheme operators lure new investors in by promising excessively high short-term returns.
The fraudster makes money by either charging fees on the “investments” or simply taking the money from the investors. Ponzi schemes usually collapse when new capital is insufficient to pay the ever-growing pool of old investors. Charles Ponzi of Boston, Massachusetts, was the inspiration for the scheme. Ponzi developed a scheme in the 1920s that promised investors a 50% return on postal coupon investments. Ponzi was able to pay his original investors, but he was unable to pay later investors, and the scheme collapsed.
Red flags for crypto Ponzi schemes
Many Ponzi schemes have elements in common. The following are some warning signs, high investment returns with minimal or no risk: every investment entails some risk, and higher-return investments usually include more risk. Investment returns that are “guaranteed” or promise great returns with low risk should be approached with caution. Overly consistent returns: Investments, especially those seeking high returns, have a tendency to fluctuate over time. Be wary of investments that produce steady returns regardless of market conditions.
Ponzi schemes sometimes include investments that have not been registered with the Securities and Exchange Commission (SEC) or state securities regulators.
- Unlicensed sellers: Certain financial professionals and their firms must be licensed or registered under federal and state securities regulations. Unlicensed persons or unregistered businesses are involved in many Ponzi scams.
- Fee structures and techniques that are secretive and/or complex: Avoiding investments that you don’t comprehend or for which you can’t receive complete information is a smart rule of thumb.
- There are no minimum investor requirements: You must be an accredited investor to participate in the most reputable private investment opportunities. Investing possibilities that do not inquire about your salary or net worth should be viewed with caution.
- Paperwork problems: Be suspicious of justifications for why you can’t review investment information in writing. Before investing, always read and examine the prospectus or disclosure statement for the investment. Keep an eye out for account statement mistakes that could indicate fraudulent activity.
- Receiving payments is difficult: If you don’t receive a payout or are having trouble cashing out your money, be wary. Ponzi scheme organizers can get members to “rollover” promised payments by promising larger investment returns.
- It comes from someone with a shared affinity: Fraudsters frequently take advantage of the trust that comes from belonging to a group with a common interest, such as a national, ethnic, or religious association. Sometimes, deliberately or unknowingly, respected leaders or prominent members are enlisted to spread the word about the “investment.”
Where can you go for help?
If you have a question or concern about an investment, or you think you have encountered fraud, please contact the SEC, FINRA, or your state securities regulator to report the fraud and to get assistance.
5. Attack on your digital wallet
Cryptocurrency is kept in a virtual wallet, which can be found on the internet, on your pc, or on a computer hard disk. A digital wallet address is a long string of numbers and letters identifying a digital wallet.
If something goes wrong with your wallet or your virtual currency funds — for example, your online exchange platform runs out of money, you send cryptocurrency to someone else, you forget your digital wallet password or your digital wallet is stolen or damaged — you’re unlikely to be able to recover your funds. Cryptocurrency also gives thieves new ways to steal. They can steal cryptocurrency from investors’ crypto wallets, create fake wallets to defraud counterparties, and create bogus crypto exchanges to defraud clients.
Automated cyberattacks, such as those that attempt to guess your password indefinitely, are still active. These bots may be able to hack your account if your account security is weak. Consider creating a strong password to avoid being hacked by a bot. Passwords must be at least 15 characters long and contain four or more random words. Passwords are more difficult for a machine or cybercriminal to guess, and they’re also easier to remember. Enabling multi-factor authentication (MFA) wherever it is accessible is another technique to prevent bot assaults. MFA adds an extra degree of security to your accounts by locking them with an additional authenticator, such as your fingerprint, in addition to your password. It’s a small action that might spare you hours of frustration if someone tries to hijack your accounts.
It’s critical that your private keys, which are a string of letters and numbers used to enable access to cryptocurrencies and are comparable to a password, remain confidential. To protect your investments and private keys, you have a variety of wallet alternatives. You own your private keys and own your cryptocurrency assets with a non-custodial, or self-custody, wallet.
Despite the concerns, cold wallets, also known as hardware wallets, are typically regarded as the safest way to store private keys. Corrupt actors in the space should also be avoided. Sim swapping is a common scam in which hackers call your phone company and persuade them to move your phone number to theirs in order to bypass your account’s two-factor verification. Others try to induce you to approve transactions or visit a scam project’s website by airdropping bogus tokens into your wallet.
Some cybercriminals purchase Google advertising that displays when people search for popular cryptocurrency wallets. When the victim clicks on the ad, believing it to be a link to their wallet site, they are taken to a phishing site that appears to be legitimate. Scammers gain access to victims’ credentials and their secret keys. Overall, it’s critical to maintain skepticism while receiving outside messages about your cryptocurrency wallet. Be wary of accounts pretending to be crypto superstars or influencers.
6. Investment or business opportunity scams
Scams concerning investment or business opportunities typically begin with an unsolicited request to become a bitcoin investor, which leads to a phony website where you can learn more about the opportunity.
You’ll be invited to actually invest and make money as soon as you sign up. It’s possible that the website contains phony celebrity endorsements or testimonials. However, once you complete your purchase, the offer is never fulfilled, and your money is never seen again. These forms of bitcoin fraud are similar to multi-level marketing or Ponzi schemes.
7. Imposter or impersonation cryptocurrency scams
When a cybercriminal pretends as a reputable source in order to persuade victims to perform a bitcoin transaction, this is known as an impostor or impersonation scam.
This could be disguised as government officials, credit card companies, banks, or even a service provider, and they’ll usually contact you via email and seek payment in cryptocurrencies. It’s even possible that it’s a phony celebrity. Remember that cryptocurrency is neither regulated by the government nor commonly accepted by companies. As a result, you should be cautious whenever you receive payment solicitations by email. Before completing a transaction, double-check with the source via a separate communication channel and verify the website’s security.
When it comes to cryptocurrency frauds, impersonations work, especially if you’re imitating Elon Musk, a former proponent of the digital currency. Scam victims have sent Elon Musk impersonators more than $2 million in cryptocurrency. However, celebrity impersonations aren’t the only thing that works. The Office of the Inspector General issued a warning after cybercriminals impersonated the Social Security Administration. In total, 14 percent of recorded losses in imposter scams are in cryptocurrency.
8. Blackmail or extortion cryptocurrency scams
Blackmail or extortion is one of the oldest scamming techniques. It occurs when you receive an email claiming that someone has compromising material about you — such as images, videos, or personal data — and they demand payment, or they will reveal it.
When the fraudster seeks payment in bitcoin, it becomes a cryptocurrency scam because the operations cannot be reversed. It’s recommended to delete these texts and contact the authorities to report the sender.
9. Scams involving Social media cryptocurrency
Scams involving crypto on social media are exactly that: scams involving cryptocurrency on social media.
This is frequently done through a fake social media post or commercial asking for cryptocurrency payment. You might even see other people commenting or posting feedback on the topic. These could, in fact, be bots. It’s possible that the post or message came from a buddy whose account has been hijacked.
Alternatively, social influencers may promote a new, perhaps fake cryptocurrency and urge their fans to sign up or send them money, which they could then multiply. This can sometimes result in influencers simply pocketing the funds. These are scams involving cryptocurrency influencers. These are considered cryptocurrency influencer frauds.
10. Loader or load-up cryptocurrency scams
Some cryptocurrency scams are as straightforward as asking for your account logins, believe it or not. A loader or load-up currency scam works like this: Scammers may contact victims and beg to borrow their account because they require greater credit limits. The scammer offers to give them a cut of the profits from their investments in exchange.
Scammers really load up victims’ accounts and then drain them, stealing all of the cryptocurrency. Even if they appear to be a trustworthy source, you should never give out your account logins to anyone.
11. Phishing cryptocurrency scams
Phishing schemes, another old-school cyberattack, usually take place via email and contain a request for money. These mails are frequently sent by cybercriminals impersonating credible sources, making phishing attacks comparable to impersonation scams.
The fake request for payment in phishing cryptocurrency scams is in the form of cryptocurrency. The communications might even be from a cybercriminal impersonating a cryptocurrency organization and disclosing information about their initial coin offering (ICO) to appear legitimate.
12. Crypto romance scams
By using social engineering techniques, romance scams target victims’ hearts. They operate in the following manner: Cybercriminals impersonate an online love interest and build the trust of their victims to the point where they beg for money.
The cybercriminal then takes the money and flees. The method is the same in a romance bitcoin scam, but the cash is asked for in cryptocurrency, which makes it much more difficult to reverse.
13. Fake crypto applications
Different cryptocurrencies have different apps as digital payment methods. Cybercriminals are capable of duplicating them.
Over 10,000 people have installed phony cryptocurrency apps. Users may begin sending payments directly to crooks after downloading these bogus apps. Fortunately, there are a few red signals to look for before downloading cryptocurrency apps to guarantee that they’re legitimate – and that your assets are as well.
14. Giveaway cryptocurrency scams
Giveaway scams are a hybrid of impersonation and social networking sites, cryptocurrency scams, in which victims are enticed to donate money to someone who promises to multiply the amount.
This could happen as a result of a bogus celebrity social media account promising to transfer twice as much cryptocurrency to followers if they send them a particular amount. In fact, followers will give money to scammers directly, never to see their money again.
15. Employment-related cryptocurrency frauds
Employment crypto scams sometimes start with an unsolicited job offer that leads the victim to a bogus website for more information about the opportunity, similar to investing or business opportunity scams.
Victims are frequently requested to pay for training in order to be fully onboarded with a business. They are also asked to pay for the instruction in bitcoin, which they are never given back.
What is the government doing to keep cryptocurrency theft under control?
Under some conditions, the SEC, CFTC, and IRS all assume regulatory control over cryptocurrencies. A cryptocurrency must meet the SEC’s definition of security, which is defined as an “investment of money in a common company with a reasonable expectation of benefits to be earned from the entrepreneurial or management activities of others.”
In its now-famous analysis of The DAO, a German crypto ecosystem, the SEC refined its application of this test to cryptocurrencies. According to the Commodity Exchange Act, the CFTC has the jurisdiction to regulate cryptocurrency as a commodity. Because of the considerable danger of investor fraud, the CFTC has lately announced that crypto enforcement is a major priority. The IRS has also decided that bitcoin investments should be considered like any other asset for tax purposes, allowing it to tax returns on crypto investments. The IRS can also investigate money-laundering offenses using bitcoin through its Criminal Investigations Division. Enforcement actions taken by the SEC, CFTC, and IRS may extend overseas to schemes that have broken US laws.
As the market capitalization and significance of cryptocurrencies expand, whistleblowers will become increasingly important in assisting the government in catching wrongdoers and preventing fraud. Whistleblowers can also take advantage of the SEC, CFTC, and IRS’s different whistleblower compensation programs to potentially share in any government recovery.
If you have been scammed by a Crypto scam and need help in getting your money back then please reach out to us to help you!
Ensure Your Safety Against Cryptocurrency Theft
Make sure your accounts are set up as safely as possible. That way, no matter how the patterns alter, your data will be safe.
Although there are reputable charities, investing platforms, and e-commerce websites that accept cryptocurrencies as payment, being pressured to do so should be taken seriously.
You can help shield yourself from fraud by remembering the following financial and cryptocurrency tips:
- Before sending payments or donations, be sure the business or organization is real and accepts cryptocurrencies.
- Investigate prospective investment prospects thoroughly. Use your personal financial institution accounts for work-from-home business purposes alone, and never give out your bank account details to anyone who isn’t listed on the account.
- Before paying out extortion and/or ransom efforts or turning your money into bitcoin to pay them, contact legal enforcement.
- The Criminal Investigative Division of the FBI has a team dedicated to preventing and combating bitcoin money laundering and fraud. Make sure to contact the regional office or visit the FBI’s Cyber Crimes Complaint Center at ic3.gov if you feel you have been a victim of fraud or wish to report suspicious activity.
- Reach out to a funds recovery firm if you have been scammed, we can help you get your money back in less than 30 days!
Although cyber scams and threats are constantly evolving, you can employ some tried-and-true tactics to keep safe online. Online, be skeptical. Keep an eye out for suspicious communications, shady websites, or anything else that seems unusual.