Cryptocurrency Scams

Most victims fall for one of six types of cryptocurrency scams.

Crypto Scams Are Profitable 

The entire virtual currency market reached a capitalization of nearly $2 trillion dollars in just 12 years. By the end of 2017, the price of a single bitcoin was $13,889.99.  It is no coincidence that just a few weeks later the U.S. Commodity Futures Trading Commission (CFTC) filed the first three lawsuits against cryptocurrency scams. The suit accused the individuals who ran them of fraud, misrepresentation and misappropriation in connection with bitcoin trading.

Con artists eye digital currency because it promises instant profit. Law enforcement authorities in every major country are now on the alert for cryptocurrency scammers.

Crypto Scammers Are Inventive

Cryptocurrency scammers are inventive and never cease to come up with a new way to steal your coins. One report claimed that during the COVID-19 pandemic, for example, that bitcoin extortion scams shot up by 1,300% in one month alone. Most of them involved sextortion.

Quite literally, crypto scammers think of everything. Want to commit suicide? There are Facebook pages advertising poison pills you can order by paying in bitcoin. Apart from the brashness and ghoulishness of it, the pills are fake. The bitcoin the scam victims sent, of course, wasn’t. 

Most victims, however, report falling for one of the six types of cryptocurrency scams below.

Pump and Dump Schemes

This is a veteran scam perfected by Jordan Belfort and popularized in the movie The Wolf of Wall Street. Scammers “pump up” or promote an “altcoin” they own in bulk and then sell it off in bulk once the price peaks. Of course, they were the ones who peaked the price in the first place by artificially increasing demand. What made Pump and Dump especially viable for scammers and especially dangerous for investors was the glut in under-sold Bitcoin alternatives (there were 45 of them by the end of 2017). By the way, speaking from his own experience, Belfort called cryptocurrencies “a wolf in sheep’s clothing.” He added that initial coin offerings (ICOs), the initial price for a new cryptocurrency, were “the biggest scams ever.”

Investment Clubs

They may be popular, but the only ones who profit from online crypto “clubs” are the scammers who run them. Their sites certainly look legitimate. Like binary options sites, they’re also sure to feature photos of satisfied members who claim they made megabucks by trusting the hidden cryptocurrency pros who stand behind the curtain. But again, just like with binary options scams, the last time you see your money will be when you hand it over to them.

Fake Exchanges

Fake cryptocurrency exchanges are easy to find. They’re all over cyberspace. They’re especially dangerous for first-time investors. They will find it hard, if not impossible, to distinguish fake exchanges from legitimate ones. In December 2017, Korean authorities closed down one of them, BitKRX. What was particularly pernicious was that BitKRX usurped the last three letters of its name from KRX, the Korean Stock Exchange. It purposely misrepresented itself in order to provide itself with a veneer of legitimacy.

Fake Wallets

No scam fits cryptocurrencies as well as fake wallets do. “Altcoins” are bytes of data, rather than metal. Therefore, owners have to park them somewhere online in a “digital wallet.” Innovative scammers with good marketing skills set up their own digital wallets. They then aggressively advertise for customers to come along and park their digital currency. Once they do so, their cryptocurrency disappears forever. And the operators of the fake digital wallet fade into the digital sunset.

Social Media Crypto Scams

Bill Gates, Jeff Bezos, Elon Musk, and Warren Buffett. Kanye West and Kim Kardashian, rapper Wiz Khalifa and YouTuber MrBeast. Barack Obama, Joe Biden and Mike Bloomberg. Apple, Wendy’s, Uber, and CashApp. What do they all have in common? 

The short answer is influence. The full answer is that they are all on Twitter, they have gazillions of followers and hackers hijacked their Twitter accounts. Same with Bitcoin and Ripple, online cryptocurrency news site Coindesk and the cryptocurrency exchange Binance. Cyber criminals targeted their Twitter accounts in what may very well be the most widespread and successful simultaneous hacking attempt ever.

After logging in, the hackers tweeted out faux messages claiming that the celebrity would double any amount of bitcoin they were sent. Some of the tweets (including the one attributed to Barack Obama) also noted that the sudden generosity was due to COVID-19.

The half-hour deadline, of course, was necessary because the hackers knew that from the moment they clicked on “Send” the clock would be ticking. They would be lucky to have even that much time before the true extent of the scam would be discovered and their phony posts were removed. Victims had to be found and suckered into the scheme before it was too late. And it was successful. The scammers walked away with 12.5 bitcoins, the equivalent of $121,000. Not bad for one night’s work. They lost out on another $278,000 because an alert cryptocurrency exchange intervened to prevent it.

Ponzi and Pyramid Schemes

Needless to say, most cryptocurrency investors acquire digital currency because they believe that their investments are going to appreciate in value at a rapid pace. So why would someone offer you a higher interest than the market currently bears? The most obvious answer is because the offer is a red light for a cryptocurrency Ponzi or pyramid scheme. One of them, GladiaCoin, promised to double the value of all Bitcoin deposits within 90 days. It collapsed from its own weight in June 2017. The phenomenon will continue. There are other such online schemes that also employ the same 200%-in-90-days business model. They eventually will collapse as well. The main difference between the operators of these sites and Charles Ponzi, who gave his name to this type of scheme, is that these guys, unlike the late Mr. Ponzi, are anonymous.

If you think you have been victimized by a cryptocurrency scam, consult with the fund recovery experts at MyChargeBack. Tracing cryptocurrency is complex and mistakes can cost you. MyChargeBack analyzes your case and assists you throughout the entire recovery process.