Cybercrime and fraud are on the rise these days. The pandemic spurred on a flurry of new attacks, and 2020 was the worst year yet for cybercrime, including virtual currency fraud.
What is Cryptocurrency?
Cryptocurrency (“crypto”) is a digital currency that you can use to buy products and services. It exists virtually; there is no actual paper money or coins. Instead, it exists online in a cryptocurrency wallet. However, some types of crypto allow you to cash it in for tokens.
There are dozens of types of crypto. The most well-known types are Bitcoin and Ethereum. You spend or exchange your crypto assets online through cryptocurrency exchanges. Transactions are anonymous and use ledgers that keep track of tokens instead of owners' identities. Crypto is an extremely attractive target for cyber thieves because of its anonymity, and it is not regulated or controlled by any consolidated financial institution.
Many people invest in cryptocurrency, hoping the value will increase so they can cash in. However, crypto values fluctuate frequently.
Virtual Currency Scams and Fraud
As with anything, cryptocurrency comes with the possibility of fraud. Scammers use various types of scams to defraud crypto owners out of their assets. Some of the most common to be aware of are:
- Fake websites promising huge crypto returns for small investments.
- Virtual Ponzi schemes – Despite what you might think, Ponzi schemes are alive and well and being used to dupe crypto investors out of their earnings by tricking people into investing in virtual currency and then using those payments to pay off old investors and so on. In 2019, the BitClub Network owners were indicted after earning $700 million in a Ponzi scheme.
- Scammers use celebrity endorsements to trick investors into buying virtual currency.
- Dangers to your crypto wallet. Recently hackers targeted a cryptocurrency exchange, and millions of owners' virtual dollars were lost due to a malware infection. Vulnerabilities in crypto wallets can also result in fraud.
Signs of Virtual Currency Fraud
According to the FTC, some signs that a cryptocurrency deal may be fraudulent include:
- “Scammers guarantee that you'll make money. If they promise you'll make a profit, that's a scam. Even if there's a celebrity endorsement or testimonials. (Those are easily faked.)
- Scammers promise big payouts with guaranteed returns. Nobody can guarantee a set return, say, double your money. Much less in a short time.
- Scammers promise free money. They'll promise it in cash or cryptocurrency, but free money promises are always fake.
- Scammers make big claims without details or explanations. Smart business people want to understand how their investment works, and where their money is going. And good investment advisors want to share that information.”
Most investments carry risk. If someone offers you a risk-free option, be wary, it is probably some type of fraud. The old adage “if it sounds too good to be true” is apropos here.
If you have experienced virtual currency fraud, contact your attorney to see how they can help.
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