Cryptocurrency scams are far too common and they can be convincing, especially for newcomers. But first, what is Cryptocurrency? Cryptocurrency is a type of cyber currency that comes in a variety of options. However, regardless of which option you choose, it all spends like real money. To obtain cryptocurrency, you must exchange real money to buy digital cryptocurrency.
So, why would anyone spend traditional money to invest in a cryptocurrency? Because for many, they see it as a quick investment opportunity.
Another reason that many find cryptocurrency more desirable is that it is not governed or managed by any authority. Also, it can quickly become untraceable. Cryptocurrency is just a new way to avoid any type of financial institution or governing body controlling your money.
But unlike government-backed money, the value of cyber money is dictated wholly by supply and demand, causing its value to be erratic, resulting in massive and gains and losses.
There are significant financial risks when it comes to cryptocurrency. However, many seniors view cryptocurrency investments as a way to grow their retirement nest egg quickly, making it too appealing to pass up.
Though it is possible to make a significant amount of profit through virtual currency, it is a very volatile financial situation in which many lose thousands of dollars. And that’s not even including cryptocurrency scams, which make up billions of dollars each year.
According to the Wall Stree Journal, cryptocurrency scams are responsible for stealing more than $4 billion in 2019. Though some of the criminals were found and brought up on charges, many of the hackers involved in cryptocurrency crimes got away with a significant amount of money.
There are several scam tactics used to swindle money out of unsuspecting seniors. Some use new methods using technology, and others use the tried and true traditional scams and scare tactics. Regardless of which means a criminal uses, there are ways to identify these cons before getting roped into giving them your hard-earned money.
There are a variety of types of cryptocurrency. Here is a list of the more common varieties, so it is easier for you to identify them if you read or hear these names.
- Bitcoin Cash
All of these types of cybercurrency are legitimate forms of virtual money.
In this article, we cover the top cryptocurrency scams, how to avoid them, tips on how to keep your retirement savings safe, and how to report these scams to the correct authorities.
Top 5 Cryptocurrency Scams
- Pump and Dump
- Imposter Websites
- Social Media
- Retirement Accounts
- Virtual Burglar
Pump and Dump
The Pump and Dump scam is when scammers flood various sites with false information, boosting the value of a particular cryptocurrency.
Sound familiar? Many of us may remember this scam, but instead of cryptocurrency, it was the stock exchange. And since it worked so well before, of course, this style of fraud would make a comeback using today’s technology.
Some of these scammers will use incentives to keep people investing until the target price has been achieved. People investing in these scams have lost thousands of dollars in mere seconds.
Also, many of these scams include new types of cyber currency, referred to as an Initial Coin Offering or ICO. An ICO is the same as an Initial Public Offering (IPO). An ICO can be legitimate, but it is also frequently used in fraudulent activities to con people out of their money.
So like with the stock scam, after the criminals see the rise in that specific cryptocurrency, they dump their cyber money, reaping the benefits of the scam.
The most reliable way to avoid being conned out of money in a pump and dump scam is to take the time to investigate the company before you invest. If someone is trying to pressure you into buying in right away, it is time to walk away, since high-pressure sales are one of the key ways criminals get us to buy into their scam.
It is incredible at how many imposter websites exist in today’s world. And these websites don’t look like a cheap website either. Instead, these websites mimic the appearance of valid and legitimate companies, right down to copying the logo and small print.
Imposter websites are common because they take little effort to get people to do business with them, mainly because they are posing as a company or organization many already know and trust.
It can be challenging to recognize whether or not you are working with the company you intended to do business with or the imposter website. And it isn’t just seniors getting scammed by criminals setting up malicious sites under reliable company names, thousands every year lose money to these criminals.
One of the easiest ways scammers get you to the wrong website is that they will create a website link that looks identical to the real web address but instead will replace the letter o with the number zero.
The best way to avoid getting caught up in an imposter website scam is to type the web address directly into the browser instead of using a search engine and clicking on a link that appears to be correct.
Also, there are two other ways you can identify the legitimacy of a website. First, secure sites will have a small lock icon identifying the website as protected. And second, if there is no “HTTPS” at the front of the URL, close the page and type the company’s website address instead.
Though HTTP and HTTPS are similar, the “s” indicates the questions and answers on the site have been encrypted.
Bots use social media platforms such as Twitter and Facebook to create fake accounts with equally counterfeit posts. The bots will create random posts requesting cryptocurrency for one reason or another.
These accounts may look like they are from people you know or famous people you follow. They could even be for false products requesting payment in cybercash (similar techniques are sometimes used in dating scams).
The requests could be something small like they are collecting donations for XYZ charity, or maybe they need to borrow a little money for something urgent, like their great aunt Irma is sick. Or it could be a company selling anti-aging products, and all you need to do is pay for shipping and handling via cryptocurrency.
You may even notice responses from people saying they sent cryptocurrency to that person or bought the product. Though some of the posts are real, many are posted from other bots from different fake accounts.
Unfortunately, these fake posts and accounts are responsible for stealing thousands of dollars from unsuspecting seniors. And rarely, is there any way to recoup lost money when it comes to these social media scams.
The best way not to get involved in a social media scam is not to send cryptocurrency to people or buy products using social media platforms. If you want to help out a friend or family member, contact them directly, not through the post, to verify the legitimacy of the request. Additionally, if you are curious about a product, look for the company online outside of social media.
Seniors are targeted continuously for retirement investment scams, especially when it comes to cryptocurrency. Fake investment companies contact seniors using emails or popups advertising a sure way to grow your retirement fund. And since more and more baby boomers are taking advantage of self-directed retirement investments, it’s easy to see why so many take an interest in these ads.
One particular scam occurred in 2018 when the SEC (U.S Securities and Exchange Commission) announced a warning about IRA fraud using cryptocurrency. The con used the initial coin offering pitch common to these types of fraud. And though there are some legitimate digital investments available, many of these are fraudulent setups.
Some of these scams will even advertise that they are IRS approved. Instead of taking that as a good sign, please take it as a red flag that something is wrong. The IRS does not “approve” various assets or custodians.
Another warning sign is that the scammer will promote a significantly better return on investment than what the current market offers.
Finally, if an advertisement is using scare tactics preying on fear of financial security in seniors, this too is another warning sign you do not want to trust your retirement fund with this company.
If you notice one or more of these red flags when searching for a good investment, close the window and move on.
Virtual burglars steal everything, including your identity to open accounts, bank account numbers, and credit card information. And now they also steal your cryptocurrency. Though there are several ways scammers can get your cybercash, one of the easiest ways is for them to download malware onto your computer.
Malware is a kind of “malicious” software cyber criminals can install without your knowledge. This software acts as a virtual spy collecting your user names and passwords to various sensitive accounts, including your cyber wallet.
To avoid malware from being downloaded on your computer, be sure your security software is up to date and that you do regular sweeps. Additionally, you mustn’t click on links for random popups or links on sketchy emails. Both of these act as a conduit to get access to your data.
Another way cyber criminals steal your cryptocurrency is stealing directly from the cyber currency institution. For example, one of the largest cryptocurrency exchanges in the world was hacked in May of 2019. The cyber criminals stole $40 million in bitcoin.
Though Binance was able and willing to cover client losses, not all cyber-currency exchanges or wallet companies can or will. This is why it is vital to choose a company that states in their agreement that they will cover losses in the event their systems are hacked.
Tips on How to Avoid Cryptocurrency Scams
- Be sure you fully understand the risk of investing in cryptocurrency and how unpredictable cyber currency can be.
- Don’t allow yourself to be pressured. Scammers will attempt to elicit feelings of fear or urgency.
- Take the time to understand what cryptocurrency is and learn about the company you plan on investing in.
- If an IRA is advertised as “IRS Approved,” don’t believe the lie – The IRS doesn’t put their stamp of approval on IRA investments.
- Avoid investments that “guarantee” high returns on your investment; there are no guarantees on investments, especially when it comes to cryptocurrency.
- Take a moment to do online registration and background check on the CFTC website (Commodity Futures Trading Commission). You can check out individuals and companies to see if they have complaints or if they are legitimate.
- Research virtual wallet providers before giving personal and payment information or using them for a transaction.
- Never invest with an unlicensed cryptocurrency seller or institution.
- Avoid contact with unsolicited ads such as pop-ups, random emails, or phone calls.
- Take the time to read the cyber wallet agreement; not all take on the responsibility for lost or stolen funds like a bank.
- Choose a cyber currency institution that insures and protects your investments.
- Please don’t invest in cryptocurrency because you read it was the hottest investment on social media. Instead, do the research yourself.
How to Report Cryptocurrency Scams
Should you become a victim of a cryptocurrency scam, or even if you believe someone is trying to scam you, you should report the cryptocurrency scam immediately to the Commodity Futures Trading Commission. There is a secure online form available to fill out on the website.
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