Americans lost $ 80 million to crypto scams in 6 months. Here’s how to avoid fraud

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It’s not just cryptocurrency prices that have skyrocketed recently, cryptocurrency scams are on the rise as well. Americans lost over $ 80 million in cryptocurrency scams between October 2020 and April 2021.

According to figures from the Federal Trade Commission (FTC), more than 7,000 people reported losses, about 12 times more than in the same period a year earlier. The median loss was $ 1,900, with people in their 20s and 30s most affected. These age groups have lost more on investment scams than any other type of fraud.

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Why are people losing so much money?

In some ways, the current environment is a perfect storm for scammers. Here are some of the reasons.

Many people don’t fully understand cryptocurrency

This learning curve makes it easier for soft-spoken con artists to deceive potential investors with crypto babble. Whenever there is a big gap in understanding, it is easier for criminals to take advantage of unsuspecting people. And blockchain technology is evolving all the time, so there is a lot for investors to do.

Massive price increases

The huge surge in cryptocurrency prices we saw earlier this year, combined with many headlines about crypto millionaires, fueled two things: a fear of missing out and an expectation of big profits. Where massive returns on normal investments would raise eyebrows, in crypto, this is believable as so many digital currencies have made big gains in just one year.

There is less consumer protection in cryptocurrencies

If you invest in the stock market, you have a certain level of security because companies and stock brokers have to follow strict regulations. In crypto, however, it can be difficult to tell the difference between real companies and fake ones.

How to avoid cryptocurrency scams

The main way to avoid crypto scams is to treat cryptocurrency like any other investment or purchase. Just because something uses the word cryptocurrency or Bitcoin doesn’t make it a magical money source.

There are several ways for cryptocurrency scammers to steal your money. People set up fake cryptocurrency exchanges, and once investors sign up and transfer their money, they find out that they can’t withdraw it. Likewise, people promote fake coins to drive up the price and then cash in before the value drops to zero. This is often referred to as a pump and dump.

Here are some ways to protect yourself against scams.

Research, research, research

Take the time to fully understand any cryptocurrency you may be purchasing. Look at the management team, what problem the crypto promises to solve, if it has offices (and where they are based) and what the competitive environment looks like. Likewise, do your due diligence on any cryptocurrency exchange or brokerage that you plan to use.

Use reputable platforms and exchanges

There are hundreds of cryptocurrency exchanges, but only a limited number are allowed to operate in the United States. If an exchange promises that you can earn interest on your coins, make sure you understand how that interest is funded. For example, find out if the stock exchange lends you your coins or if it stakes them and pays you the rewards.

Take a close look at URLs

Another common scam is to imitate popular cryptocurrency websites or apps. You are then led to transfer your coins or your money to a fake site. Bookmark the sites you use regularly and pay close attention to URLs. For example, pay attention to letters that have been replaced with numbers, such as an “l” for a “1” or an “O” for a “0”.

Beware of celebrity mentions

Celebrity mentions can be suspect as we do not know if the person was paid to promote this piece. In addition, imitators also made a fortune. For example, the FTC reports that people have paid Elon Musk impersonators over $ 2 million in the past six months or so.

Do not give your cryptocurrency passwords or keys to anyone

Just as you wouldn’t give your bank PIN or email password to a stranger, you should also be wary of anyone asking for your passwords or crypto keys. The key to your cryptocurrency is like a bank PIN – a code that only you have access to.

What to do if you’ve been scammed

Realizing that you have been scammed is a horrible feeling. If this happens, the statistics above show that you are not alone. These criminals have developed sophisticated ways to steal your money. It can be difficult to recover money lost in cryptocurrency, but here are some steps you can take:

Call your bank or cryptocurrency exchange. If you explain that the transaction was fraudulent, you may be able to reverse it, especially if you paid with a debit or credit card. Protect your identity. If you have shared personal information, you may need to take steps to prevent further fraudulent activity. Go to identitytheft.gov to report what happened and find out, for example, how to freeze your credit and prevent crooks from opening accounts in your name. Contact a cyber investigator. Companies like CipherTrace can help you track down stolen funds, and in some cases, they’ll provide you with free assistance. You will need to provide transaction IDs and other information about the scam. Report it to the FTC. Make sure scammers don’t get any more money from anyone else by reporting the fraud to the FTC. You can also get advice on what other options you have.

As cryptocurrencies become more and more mainstream, we can expect increased consumer protections – and, hopefully, less scams. In the meantime, keep in mind that there are people out there who are trying to squeeze your hard earned money away from you, so do your best to stay up to date on how to protect yourself and your investments.

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