Cryptocurrency Fraud: How to Identify It and Protect Your Financial Future
As technology evolves, so does criminal activity. With the rise of the internet, scammers have found new and creative ways to victimize consumers. One of the newest industries to see a rise in fraud is Cryptocurrency. The Better Business Bureau (BBB) reports that cryptocurrency scams have tripled in recent years, causing the loss of around $8 million in 2021 alone. Here at The Savings Bank, we want to safeguard consumers by ensuring they have up-to-date information.
WHAT IS CRYPTOCURRENCY?
Cryptocurrency has only recently become a major industry; however, market capitalization already exceeds over two trillion dollars. Cryptocurrency (abbreviated as crypto) is “a digital payment system that does not rely on banks to verify transactions” and is entirely kept online (BBB). The two most well-known types of crypto are Bitcoin and Ethereum. The principal way cryptocurrency systems store transaction information is through a “blockchain” database. This secure electronic database is meant to generate trust and dispel the need for third party guarantors. Everyday consumers have easier access than ever to Bitcoin ATMs and kiosks that pop up in chain and convenience stores. Ease of accessibility makes cryptocurrency popular with consumers, but this is what also makes it popular with criminals.
TYPES OF CRYPTOCURRENCY SCAMS
Social media is the most common place for crypto scams. The BBB estimates that 25% of all scams in 2021 started on social media. This can take the form of a friend’s hacked Facebook asking for crypto investments, fake celebrity accounts promoting various crypto scam websites, or even bogus dating profiles asking for emergency funds via crypto transfers.
There are two ways criminals utilize fake websites to scam consumers. One way is to set up legitimate looking websites, sometimes based off real crypto purchasing apps. Scammers will communicate with the victim, show fake graphs of all the money made and then, when the victim wants to take the money, heap on hefty fees before the money disappears all together. The second way criminals use fake websites is to have consumers set up a digital “wallet” on the website where their money is transferred directly to the scammer under the guise of a cryptocurrency purchase.
- Fake investors will urge the purchase of non-existent “new” forms of cryptocurrency with the victim’s current crypto, resulting in a total loss.
- Criminal organizations will hack into a digital “wallet” and steal cryptocurrency.
- Scammers will ask for crypto as payment for hard-to-find items that never ship.
- Criminals will ask for cryptocurrency up front for loans that are never originated.
- Imposter Social Security or IRS calls will claim victim information was used to commit a crime and instruct the victim to wire money for safekeeping to a fake government account.
- QR codes will direct to malicious crypto websites that steal data, embed malware, and redirect payments.
HOW CAN YOU AVOID CRYPTO SCAMS?
1. Guard your digital “wallet” and all account information.
2. Assess email and website addresses carefully.
3. Never pay for products with cryptocurrency.
4. Use extra caution on social media and never trust anyone you haven’t met face-to-face.
5. Only download apps from your designated app store.
6. When in doubt, contact your bank!
We at The Savings Bank are always available to hear your questions and concerns so that you can feel confident about your current and future financial decisions.