bitcoin scams are like a box of chocolates. you never know what type you are going to find.
While the most brazen crypto scams end up in the headlines, like the case of a Las Vegas poker player who stole $500,000 from another loan shark, most blackmails are more prosaic. think of schemes that use threatening phone calls, a desperate request for money, or a demand to transfer sums of money in cash or otherwise.
Reading: Bitcoin mining scam
Whatever form it takes, there is no denying that cryptocurrency fraud is on the rise. The Federal Trade Commission (FTC) received 7,000 reports of cryptocurrency theft, with a combined value of more than $80 million, between October 2020 and March 2021. That’s a 12-fold increase in cases and a 1,000-fold increase. % in cash amount compared to the same period of the previous year.
When it comes to bitcoin fraud, the strengths of cryptocurrencies turn against the victims.
“Bitcoin-related scams are traced with other online criminal exploits until you try to recover your assets,” said cybersecurity expert adam levin. “Cryptocurrency is designed to be hard to trace and even harder to recover. once transferred, it disappears, with some very high-level exceptions.”
While the number of bitcoin transactions has remained static in recent years, the value of cryptocurrencies has increased. one bitcoin was worth $9,000 in April 2020 compared to roughly $43,000 now.
These are the bitcoin scams to avoid.
bitcoin fraud and imposters
In the aforementioned poker scam, the perpetrator allegedly posed as the victim’s business partner on the encrypted text application Telegram. the fake partner wanted to exchange $500,000 worth of bitcoins, plus a $50,000 fee, for cash. the victim sent the bitcoin, but never received the cash. when he contacted his real partner by other means, the partner had no idea what was going on.
The numbers involved in bitcoin imposter schemes are not always that large. For example, a scammer posing as a coinbase reporter contacted PR firms offering positive client coverage for a paltry $600.
And then there are the twists on old-fashioned social security scams. for example, to naples, fla. a criminal told a resident that her social security number had been stolen and was being used to open fraudulent bank accounts. she was instructed to download an app and then transfer all her money from her bank account to bitcoin. Fortunately, a fraud alert appeared on her phone before the deed was done.
“always take a moment before clicking on links sent via email or sms, and don’t install apps on your mobile device unless you’re 100% sure they’re legit by checking reviews on the platform where you found them , ” Levin said.
the ftc warns of another social security scam in which people are told to deposit cash into bitcoin ATMs to pay scammers claiming to be from the social security administration.
bogus bitcoin investment scams
Bitcoin is an abstraction of an abstraction. it is a store of value that not only does not take any physical form, but also lacks the backing of the full faith and credit of a sovereign government.
Enthusiasts find these aspects of crypto very attractive. many bitcoin investors believe that the less government involvement in the money, the better. others prefer to engage in financial transactions that are difficult for authorities to trace.
Unfortunately, these are also huge boons for scammers who create fake websites that claim to offer new investors the chance to make a quick buck. This is what happened to a victim of a 2017 scheme from Australia.
The man, identified by ABC daily as Jonathan, saw an Instagram post announcing the possibility of a 50% return on bitcoin mining. he initially sent the site $50 and soon after made $30 profit.
also, the instagram account was full of videos of testimonials and other people who supported the service, and had thousands of followers. seemed legit.
then prostylized his new opportunity to friends and family. In total, Jonathan, his family and friends contributed about $20,000. then the account disappeared, and the thief with it. He not only lost her money, but some of her friends don’t talk to her anymore.
The total cost of these types of ponzi-style bitcoin scams can be enormous.
“many people have reported being lured to websites that look like opportunities to invest or mine cryptocurrencies, but are fake,” according to the ftc. “sites use fake testimonials and cryptocurrency jargon to appear credible, but promises of huge guaranteed profits are just lies.”
bitcoin giveaway fraud
In July 2020, something truly remarkable happened. celebrities and famous figures from all over the world took to their twitter accounts simultaneously to promote the same bitcoin giveaway offer. Surprisingly, it seemed too good to be true.
“I am giving back to my community because of covid-19!” former president barack obama wrote on his twitter account. “all bitcoins sent to my address below will be returned in duplicate. If you send $1,000, I’ll give you $2,000 back!”
The accounts of joe biden, rapper kanye west, and former new york city mayor mike bloomberg, among others, posted the same message.
As you probably guessed, the giveaway offers were part of an unprecedented Twitter hack. Jack Dorsey, the former CEO of Twitter, called it “a tough day” for the social media company.
However, these types of scams are nothing new. The FTC estimates that over a six-month period in late 2020 and early 2021, people allegedly sent more than $2 million worth of cryptocurrency to investment fraud purporting to be run by Tesla Inc. founder and cryptocurrency enthusiast elon musk.
crypto romance scams
Bitcoin’s meteoric rise has dovetailed with the massive adoption of dating apps that make finding new romantic partners a breeze. while that can be a blessing for people looking for love, it’s also a gold mine for scammers.
In fact, cryptocurrencies were the top payment option for romance scams reported to the ftc in 2021 ($139 million), followed by wire transfers ($121 million), wire transfers ($93 million dollars) and gift cards ($36 million).
While romance scams are nothing new, cryptocurrencies add a new twist: unsuspecting lovers believe they are participating in a cryptocurrency investment opportunity.
Let’s take Mike (not his real name) as an example, who was recently profiled by NBC News. Mike met a woman named Jenny on Tinder. they struck up a relationship, texting each other on tinder and whatsapp.
After about a month, Jenny told Mike that she had some good advice. she claimed that her uncle worked at jpmorgan chase, and “…was the world’s expert on bitcoin options.” mike was in the market for love, not bitcoin, but he soon became interested and invested $3000 in crypto.com, a legitimate cryptocurrency exchange.
eventually, the scam got deeper. Jenny convinced him to move his money to a different exchange and keep investing. his wallet soon reached a value of 1 million dollars.
Mike became suspicious when Jenny told him to send his tax payments to the Department of Homeland Security instead of the Internal Revenue Service (IRS). then he found out that he couldn’t withdraw his money from the new crypto exchange account, at which point he realized it was all a long scam. mike ultimately lost nearly $280,000.
how to recognize bitcoin scams
It’s easy to look at these individual cases and marvel at how dumb the victims seem to be.
why would mike listen to a woman he had never met and agree to invest hundreds of thousands of dollars? how could someone give away $500,000 worth of bitcoins to a business associate without at least picking up the phone to discuss the deal? how could anyone believe that they could get a guaranteed 50% return?
The problem is that it’s easy to lose your skeptical faculties when you feel like you’ve met your future spouse, are chatting with someone you think is a close match, or think you’ve found something safe. it’s easy to miss the warning signs when these confounding factors cloud your judgment.
That’s why it’s important to keep a few rules of thumb in mind whenever someone you’ve never met presents you with an opportunity to make money in bitcoin.
- Don’t believe the hype. Any claim for a guaranteed return, especially a very large guaranteed return, should always be treated as a scam. There are virtually no legitimate investments that can double your money in a week or a month, or even a year, as victims of Bernie Madoff can attest. Similarly, ignore any claims that your bitcoin investment can be “multiplied”.
- bitcoin for bitcoin. they can sell it to someone else for a higher price on a certain date. future. that is what makes cryptocurrencies a highly speculative investment. always ignore “investment opportunities” that claim to be helping you get special or rare deals involving bitcoin.
- obsessed with bitcoin. let’s say you meet someone online and really want that you invest in bitcoin. it is almost certain that they are lying to you. meanwhile, the government, especially the social security administration, does not track it or demand instant crypto payments. if you’re dealing with someone who’s demanding you adopt bitcoin in any way, log off and call the police.
If you suspect you have been the target of a cryptocurrency scam, file a report with the FTC. When you share information about bitcoin scams, you can help the FTC investigate fraud methods and keep Americans informed about new scams.