Better Business Bureau study shows cryptocurrency is ripe for fraud and financial loss
Nashville, TN – Cryptocurrency is the new hot trend in investing, and still not much is understood about this volatile and volatile digital payment system that does not rely on banks to verify transactions. This has created a fertile environment for scams, according to new in-depth investigative research from the Better Business Bureau® (BBB®), which states, “There is a virtual tussle between the legitimate and fraudulent use of cryptocurrency. change”.
The study – Cryptocurrency scams: BBB study finds lack of regulation and consumer education leads to dramatic increase in fraud and financial loss – examines the many facets of cryptocurrency and the variety of ways in which criminals exploit the cryptocurrency market to rob investors and victims of common crimes. scams. Read the full study here.
Ethereum is the second most common cryptocurrency and plays a pivotal role in the increasingly popular non-fungible tokens (NFTs), digital assets such as images or music that are purchased with cryptocurrency as an investment. . Importantly, cryptocurrency operates outside of the traditional banking system and is not subject to the same protections as bank deposits or credit card transactions.
Reports of victims of significant financial loss due to cryptocurrency scams are skyrocketing. In 2021, BBB received over 2,400 complaints with monetary losses of nearly $8 million involving cryptocurrency companies. BBB Scam Tracker reports that crypto scams numbered over 1,200 in 2021 and also totaled nearly $8 million in losses. Scam Tracker reports to BBB have tripled between 2019 and 2021, and reported losses have tripled in the past two years.
The cryptocurrency was the second largest scam loss reported to the Federal Trade Commission (FTC) in 2021, with losses of $750 million. The FBI’s Internet Crime Complaint Center (IC3) and the Canadian Anti-Fraud Center (CAFC) also saw significant increases in reports received and significant increases in losses. The BBB study notes that research shows that most people don’t report when they are scammed, so the actual losses appear to be much greater.
Cryptocurrency has some key characteristics that make it attractive to scammers: it is relatively unregulated and difficult to recover once lost; it’s hugely popular, fueled in part by celebrity endorsements; and it is not well understood by the general public. The study indicates that the cryptocurrency market offers new opportunities for proven investment frauds such as Ponzi schemes and fraudulent ICOs (initial coin offerings), especially given the development of new currencies and the lack of protections that government regulation has made available to more traditional investors.
Many victims report that after purchasing cryptocurrency, they were directed to websites where they had to create an account in order to monitor their investments. The websites are sophisticated, and many of them offer live chats with customer service. But victims who wish to withdraw their “winnings” are told that they must contribute more money to cover taxes, commissions or other fees. In the end, they can never withdraw any money.
A consumer told BBB that she started learning about investing in Bitcoin in the summer of 2021, contacting via WhatsApp an investment service that she saw mentioned several times in the comments of a YouTube video about bitcoin. The woman was instructed to buy $1,500 in Bitcoin through CashApp; 10 days later, she received a screenshot showing an account balance of over $7,300.
However, when she decided to withdraw her winnings, she was told to pay a 10% commission and a brokerage fee of over $800.00. After paying both, she received an email asking her to pay an additional sum of nearly $1,200 to withdraw her money. She concluded it was a scam and reported it to BBB.
Data from BBB Scam Tracker shows that cryptocurrency scams most often originate from social media, with the FTC noting that 25% of reported crypto frauds in 2021 began on social media. Scammers can pose as a victim’s friends to tell them about their success in crypto investing, or they can post Facebook posts promising big wins.
Cryptocurrency also features prominently in other scams. Law enforcement and the BBB report that love scammers have started convincing their victims to invest in cryptocurrency through sophisticated fake apps, disappearing with the money when the victim attempts to withdraw the product. Ransomware scams also demand cryptocurrency as payment in many cases, the BBB study notes.
Data from BBB Scam Tracker shows that cryptocurrency is also a commonly requested method of payment in fraudulent online sales, advance loan scams, employment scams, extortion scams, government impostor fees, etc. Illicit transactions on the so-called dark web are often carried out using cryptocurrency, and they are used in money laundering.
Law enforcement has prosecuted cases involving large cryptocurrency losses and the use of cryptocurrency in criminal activity. The US Department of Justice has made arrests this year in cases involving billions of dollars in cryptocurrency laundering.
Tips to avoid cryptocurrency scams:
- Keep your wallet. If you are buying cryptocurrency, wallet security is paramount. If you lose the key, your funds disappear forever.
- Look carefully at email addresses and website addresses. Phishing scams often attempt to trick people into logging in and then capture login credentials. These can then be used to steal money. Searching for an exchange with an internet search engine can lead to fake sites that advertise and pose as real companies. Be especially careful when viewing them on a phone.
- Do not pay for products with cryptocurrency. Be careful if someone asks you to pay with Bitcoin or another cryptocurrency. No one in government will ever ask for this form of payment.
- Beware of bogus salvage companies. Fraudulent companies sometimes claim they can recover stolen money – for a fee. They are usually scammers.
- Beware of fake reviews. Scammers often create fake reviews for their own businesses.
- Beware of celebrity endorsements. It can be tempting to lean on a prominent figure who has invested in cryptocurrency. But these endorsements are often not allowed and even if they are, the celebrity may be paid for the effort and may not know more than you.
- Pay attention to claims made on social media. This is the most common place where people come across investment scams.
- Beware of “friends” contacting you on social media and telling you how they made money with cryptocurrency. Accounts are frequently compromised. Call your friend by phone to see if it’s really him.
- Only download apps from Google Play or the App Store. Trusted app stores don’t eliminate the threat of app scams, but they provide a basic level of protection. Be careful with apps. Some contain malware.
- Don’t believe promises of guaranteed returns. No one can guarantee the return on an investment.
- Seek help and support. Cybercrime Support Network offers a free, confidential support program for romance scam survivors.
Recommendations for industry and regulators:
- Social media should do more to:
- Prevent profile hacking
- Stop fraudulent advertisements for cryptocurrency investment programs
- Prevent Illegal Use of Celebrity Names to Promote Cryptocurrency Scams
- Regulators must carefully monitor Bitcoin ATMs to prevent their use by scammers.
- BBB, the media, trade groups and government agencies must continue to educate the public about the risks.
- The US Treasury Department and security regulators should provide strict oversight and regulation of cryptocurrencies.
Where to report a scam or file a complaint:
- Better Business Bureau — file a complaint with your local BBB at BBB.org if you have lost money or report an online scam at BBB.org/scamtracker.
- Federal Trade Commission (FTC) – File a complaint online at reportfraud.ftc.gov or call 877-FTC-Help.
- Internet Crime Complaint Center (IC3) — file a complaint online at ic3.gov/complaint and include:
- All Transaction IDs
- Where you sent your crypto from (private wallet, account at exchange X, etc.)
- Where you thought you were sending your funds (author’s private wallet, arbitrage account, etc.)
- All the details about the scam and the crooks.
- Canadian Anti-Fraud Center — report online at antifraudcentre-centreantifraude.ca or call 1-888-495-8501.
- US Securities and Exchange Commission — SEC.gov/tcr
About BBB Serving Central Tennessee and Southern Kentucky
For more than 100 years, Better Business Bureau has helped people find businesses, brands and charities they can trust. BBB provides objective advice, BBB business profiles on over 5.3 million companies, 11,000 charity ratings, dispute resolution services, alerts and educational information on topics affecting market confidence. Visit bbb.org for more information.
There are local and independent BBBs in the United States, Canada, and Mexico, including BBB Serving Middle TN and Southern KY, which was founded in 1961 and serves 45 counties in Middle TN and Southern KY. Visit bbb.org for more information.