They warn of an alarming increase in cryptocurrency scams

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Jeffrey Vaulx, a special education teacher in Memphis, said he decided to invest in cryptocurrencies, not realizing he was being scammed, when he saw on Facebook that one of his acquaintances was making a lot of money with these virtual currencies.

“I contacted my friend for inbox. I didn’t have his phone number. He told me that she could start by investing $1,000. Upon investigation, everything seemed correct on the website. I started with $500 and then he told me that my investment had gone up to $8,000. But to get my money out, I had to pay a one-time fee of $500.”

Vaulx would find out later that his friend’s page had been hacked and that it was all a hoax.

So I had to start looking at Google to see what I had to do to report this guy so he wouldn’t hurt anyone else.”

From the beginning of 2021 to June 2022, people have lost more than $1.3 billion due to cryptocurrency scams.

Nearly half of those scammed reported that the scam started with an ad, post, or message on social media. Most of the losses, around $785 million, involved false investment opportunities.

Cryptocurrency was the payment method used for approximately one in four reported dollars lost to fraud during this period.

During the video conference: “FTC data shows a huge increase in cryptocurrency scams: more than $1 billion lost since 2021, younger people are the most likely to report a loss”, organized by Ethnic Media Servicesexperts from the Federal Trade Commission explained how cryptocurrency scams work, why they are growing so fast, how to spot, avoid and report them.

Rosario Mendez, senior member of the Federal Trade Commission (FTC), explained that cryptocurrencies are a digital currency that exists primarily electronically and was created in 2009.

“They are very similar to other forms of digital currency such as reward points or airline miles on your credit cards. They can be transmitted as on-line and they are almost never going to see them as something physical.”

However, he pointed out that there are some exceptions with so-called bitcoin ATMs, where you can get a physical card or some kind of representation of bitcoin investments.

“Normally there are no intermediaries because the spirit of cryptocurrencies was to create a financial system in which individuals could interact without having to open accounts or give information about their identity.”

He added that there are centralized places like the Coinbase online platform where you can go and buy different kinds of cryptocurrencies.

“The one we have heard the most about is bitcoins, but there are hundreds, and every day there is a new one because they are based on software. There is a meme that turned it into a cryptocurrency, which is Dogecoin and is worth $4 million; of the Ether cryptocurrency there is $17,000 million. There are $35 billion in bitcoins in the world.”

Cryptocurrencies do not have government backing.(Getty Images)

What is the difference between cryptocurrencies and US dollars?

“The first thing to say is that cryptocurrencies are not backed by the government. There is no one supervising that the value is stable and that consumers can trust that they will get their money back.”

He added that the values ​​change every day; and sometimes in hours.

“They should be aware of their volatility, but consumers don’t understand that they may be at risk, and they can’t trust that they can buy products or services because they are not stable.”

He said that if you decide to pay someone with cryptocurrency, you need to think of it as cash.

“The only way to get it back is if a person returns it to you. So if you accidentally send Bitcoin to the wrong person, unless that person returns it to you, there is no one to help you.”

How do people use cryptocurrencies?

“First of all it is about investing, speculating and making wealth. People are hoping that the value will increase and they can sell them. They are really seen as an investment vehicle, not as a form of payment.”

But he added that there is a class of quick payments that in theory can be used to send small amounts of money without paying fees.

And when you want to send someone money, they open an app on your phone, or you go online on your computer. “You access your account on the Coinbase website that has the funds, which is called a wallet, and tell it what you want to do. It usually takes you 10 minutes to validate your transaction; time in which they confirm that the other person has already received the funds.”

Cristina Miranda, a specialist in consumer education at the FTC, said that in 2018, $12 million was reported in cryptocurrency losses due to scams, but by 2021, it was $653 million.

“Between January 2021 and June 2022, scams were reported for $785 million in investments; $220 in romance scams, $121 million for business imposters; and $56 million for government imposters in which cryptocurrencies were used as a payment method.”

He noted that many of these transactions are irreversible, but also quite a few people get scammed because they are not familiar with how cryptocurrencies work.

“They come in with a lot of enthusiasm, thinking they can make a lot of money.”

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They recommend those who are on online dating sites to be careful with those who offer to invest with cryptocurrencies. (Getty Images)

How do the scams work?

“Fraudsters are constantly looking for ways to steal money. A sure sign of a scam is when you see a tweet, text, email, or social media message telling you to pay with crypto via wire transfer or gift card.”

He said that by paying for these methods, there is no way to get the money back.

“We are seeing an alarming growth in losses from cryptocurrency scams and the biggest one is investment-related fraud. And this usually happens when you come across a company or person that promises you to earn a lot of money in a short time to achieve financial freedom, without giving you many explanations.

He noted that sometimes they use celebrities or testimonials that are often false.

“So no matter what the investment is, we should always do the research to understand how it works and ask questions about where the money is going.”

He pointed out that another particular type of investment scam is romance and online dating. “Scammers contact you on online dating sites or apps. And they start telling stories to try to tap into the emotions of the people they’re targeting. And then what we have seen is that often, they ask you for money through cryptocurrencies with the promise of helping you invest.”

He noted that if someone you haven’t met in person sends you a money request message on a dating site or app demanding you send cryptocurrency, the money will typically disappear and you usually won’t be able to get it back.

“In phishing scams, they send you unexpected text messages, posing as well-known companies like Amazon or Microsoft. What happens is that if they click on a link in any of the texts or if they call the number that appears in that popup, they will connect you with a scammer who tells you about fraud on your account and that your money is at risk. ”.

Other scammers, he said, like to pose as government agencies, telling you that your accounts or benefits will be frozen as part of some kind of investigation.

“We have also seen reports of scammers calling posing as a local utility with a problem and will often demand that people withdraw money from their bank, investment or retirement accounts to protect their money, paying them with cryptocurrency. to resolve whatever issue they are calling about.”

He added that in a similar twist to gift card scams, sometimes scammers will tell people to stay on the phone and direct them to a store with a cryptocurrency ATM.

For more resources to help you avoid scams, visit: ReportFraud.ftc.gov

For alerts on the latest cryptocurrency scams, visit: consumer.ftc.gov

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