Crypto Craze Attracts Scam Artists
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Since October 2020, cryptocurrency scams targeting new investors have resulted in a total loss of over $80 million. Thousands of dollars in investments disappeared overnight from individuals’ accounts, revealing that attackers have taken the opportunity presented by the rush to invest in cryptocurrency.
Consumers 20-30 Years in Age Report Cryptocurrency Scams as Main Source of Loss
Investors between the ages of 20 and 30 have reported more money lost to fraudulent cryptocurrency accounts than any other scams or cyberattacks. An explanation for this is that most young consumers are first time investors, new to the world of cryptocurrency with little understanding of its function or mechanics. The FTC has provided resources and advice on the topic to prevent individuals from falling victim to fraudulent crypto endeavors.
Common Cryptocurrency Scams
Some common tactics used include:
- Appealing to consumers in financial trouble by promising financial freedom or instant payouts
- Guarantees that the more you invest, the more you will make by getting others to invest as well
- Offering cryptocurrency management in exchange for cryptocurrency you already bought
- Fraudulent job offers
- “Free money” offers
- Celebrity impersonations (most commonly impersonating Elon Musk, which lost $2 million worth of investor money)
What is Cryptocurrency and Why is Everyone Investing?
Cryptocurrency is a digital form of currency that allows a degree of anonymity and freedom that government-backed currency does not allow. There is no intermediary institution or bank that charges fees on your money, and the worth of a single “coin” fluctuates, so that consumers can watch their money grow exponentially in shorter periods of time. Cryptocurrency is purchased on exchange networks or “mined” through solving very complex mathematical puzzles. It is used to make purchases without considering exchange rates or fees of any sort, and is stored on digital wallets, either online or on an external drive.
What makes cryptocurrency an appealing investment to new consumers is its potential for growth. In contrast to earning interest through a bank savings account which happens predictably and usually at very low percentages, cryptocurrency’s value increases (and decreases) at an undetermined rate, sometimes raising value by over 100%. Those that understand cryptocurrency on a deeper level also invest in order to trade and make purchases without answering to governing entities.
Even with a degree of anonymity, however, cryptocurrency can be traced through a digital ledger called “blockchain” which publicly keeps track of crypto transactions. Making purchases with cryptocurrency also comes with great financial risk. If you pay someone who refuses to deliver their product or service or disappears, no governing entity or financial institution can help you get your money back, as cryptocurrency comes with no corporate or government guarantees. Its value volatility also carries a negative quality. As easily as value can shoot up, it can also plummet overnight as the market fluctuates.
A Word of Caution
As we advise you to do with unfamiliar or suspicious emails, determining the source of your investments and your correspondences is paramount. Be sure to research every seller for reviews or for scam reports.
It is tempting to jump on cryptocurrency investing as it gains momentum, but taking a pause before making any purchases or making any agreements will save you headache and financial trouble in the future. Be very wary of any promotions or outreach that makes big promises or guarantees or requests that you provide payment in cryptocurrency or gift cards ahead of time. The safest way to invest is through choosing well-researched, reputable sources.