As I was doing research on the rise in the number of people falling victim to scams, I noticed that as cryptocurrency becomes more popular, so do the scams.
Some fraudsters scam consumers by getting them to “invest” in cryptocurrency, while others find clever ways to rob you of your cryptocurrency. And in many cases, cryptocurrency is harder to track and recover.
Sam Zimmerman is the CEO of Sagewell Financial, an online banking and retirement platform geared to helping adults 55 and older. Zimmerman says there are some common scams fraudsters use. Asking people to convert investments into real crypto and tricking them into transferring it—never to be seen again—is at the top of the list.
Capitalizing on the “gold-rush” element of crypto glamorized in the media, scammers will convince consumers to invest in a sure-fire crypto investment through a fake account/purchasing exchange which will often be part of an elaborate Ponzi scheme. Zimmerman warns that scammers will also create fake coins and convince seniors to invest in initial coin offerings, or ICOs.
Some people may have experience or understanding in IPO investments in real stocks but may not properly vet the fake opportunity because they are trying to ‘get in early.’ Scammers will pretend to be the authorities investigating a crime that used someone’s identity/accounts for criminal purposes. In order to extricate or insulate themselves, they will be asked to transfer assets into a “government account” which will speed up the process of returning their money.
And it’s not just consumers being tricked into “buying” cryptocurrency, but it’s also people being tricked into giving someone their cryptocurrency. One way people fall victim to a crypto scam is through dating apps. The Federal Trade Commission says about 20% of the money lost in romance scams from October 2020 through March 2021 was sent in the form of cryptocurrency.
In general, crypto scams will try to gain private and personal information such as security codes or trick someone into sending cryptocurrency to a compromised digital wallet.
Zimmerman’s advice is to always ask about any investments which you don’t understand. Many people have heard of cryptocurrency and have seen news reports on the outrageous profits some have earned. It may seem like a gold rush and scammers will prey on this by creating false cryptocurrencies and Ponzi schemes. Relationship scammers often will ask for money so they can invest in “sure-thing” crypto tips as well.
Zimmerman’s bottom-line, “Be particularly wary about people asking you to change money into cryptocurrencies. Once converted to crypto it is largely unregulated, unprotected, and uninsured, making it easier to get away and virtually impossible to recover.”
According to the FTC website if you see a tweet, text, email or other message on social media that tells you to pay with cryptocurrency, that’s a scam—a sure sign of a scam is anyone that requires you to pay by cryptocurrency. In fact, anyone who tells you to pay by wire transfer, gift card, or cryptocurrency is a scammer. The FTC has helpful information regarding cryptocurrency and scams.
Jeanette Pavini is an Emmy Award winning journalist specializing in consumer news and protection. She is the author of “The Joy of $aving: Money Lessons I Learned From My Italian-American Father & 20 Years as a Consumer Reporter.” Jeanette is a regular contributor to TheStreet. Her work includes reporting for CBS, MarketWatch, WSJ Sunday, and USA Today. Jeanette has contributed to “The Today Show” and a variety of other media outlets. You can follow her money saving tips and ways to give back on Facebook: Jeanette Pavini: The Joy of $aving Community. Find links to her social media and her book at JeanettePavini.com.