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Cryptocurrency Scams Are On The Rise

cryptocurrency scams

Digital currency is the new trend that has gained rapid popularity and adoption from clients. However, this popularity has also led to an increase in cryptocurrency scam cases. Since its inception in 2008, critics and investors have always pointed fingers at the immutable ledger that blockchain technology provides. The lack of a regulation mechanism has made it easy for thieves to abuse this system by launching hacking campaigns.

Recent data by the Federal Trade Commission (FTC) shows that Americans lost an estimated $80 million in cryptocurrency scams since October 2020. This is a 1000% increase, compared to the data that was released in the fall of 2019.

Who are The Scammers Targeting?

With many celebrities backing dogecoin, the number of Americans that have shown interest in crypto investments has grown tremendously. The space is now full of new players trying to understand how cryptocurrency works. All these have given scammers an advantage, according to Emma Fletcher, a program analyst with the FTC.

The FTC recorded about 7,000 cases of digital currency scams from last fall, representing an average loss of $1,900 per investor. The losses continue to take place despite the 2018 cryptokitties hack that shed light on the need for safeguarding crypto ventures.

Among those that were hit hard are young investors aged between 20-39 years. Representing 44% of the cases reported, this group is five times more likely to lose money in crypto scams than any other age group. An even more shocking finding is that among all the investment fraud cases Americans aged between 20-30 years reported, more than half were related to cryptocurrency.

Two major factors make digital coins a hotspot for scammers. First, it is not easy to reverse digital currency transactions. Once you send funds from your digital wallet to a scammer, there are few things you can do to get them back. Secondly, tracking cryptocurrency transactions is not easy. This has made it hard to trace fraudsters.

How Cryptocurrency Scams Happen

FTC reports show that scammers are devising new ways every day to swindle uninformed investors through digital coins ventures. One of the most popular tricks is fraudsters promising to offer investment advice online, only to redirect clients to fake websites.

In another scheme, scammers have created fake accounts of celebrities supporting the use of cryptocurrencies, such as Elon Musk, Snoop Dog, and Kanye West. They use these accounts to trick investors into sending them digital coins in exchange for contributions to their investments.

Other strange cases involve fraudsters posing as government agencies or third parties associated with cryptocurrency exchanges such as Coinbase. For example, FTC recorded cases of many people who paid scammers posing as agents from the Social Security Administration via Bitcoin ATMs.

How to Avoid Cryptocurrency Investment Scams

As much as it might be hard to fully regulate digital currency frauds, there are measures you can take to avoid them. If you are a new cryptocurrency investor:

  • Be cautious with anyone insisting on cryptocurrency as their only mode of payment. Many scammers often prefer transactions through gift cards, cryptocurrency, or wire transfers.
  • Watch out for anyone promising you unrealistic investment returns through a get-rich-quick means in exchange for digital coins.
  • Do a thorough background check on individuals posing as celebrities or government agents. Many Americans have lost over $2 million to imposters of Elon Musk, the CEO of Tesla within a period of six months.
  • Transact with people or websites you know well. If you haven’t met them in person, search for their reviews online to validate their identity.
  • Do not be moved by messages threatening you to send cryptocurrency or face unknown consequences.

Be the First One to Get Investment Scam Alerts

As the crypto market grows, various scams also sprout out specifically designed to profit from inexperienced investors. The best way to avoid cryptocurrency scams is by having updated information on the ways fraudsters use to trick customers. We provide you with vital tips on how to avoid scams. Follow our scam blog for more insightful updates.