Cryptocurrency Fraud

Pump-and-dumps. Using messaging apps or social media, crypto promoters plant rumors that a famous mogul is backing a certain currency. The aim is to lure investors to buy, drive up the price and then sell their stake, causing the currency’s value to plummet.

Ponzi schemes. Some crooks peddling crypto create the illusion of big returns by paying off old investors with new investors’ money. Federal authorities are pursuing criminal and civil cases against one such operation, called BitConnect, that raised more than $2 billion before it was shut down.

Romance scams. Crooks persuade people they met on dating apps or social media to invest or trade in virtual currencies. The FBI’s Internet Crime Complaint Center (IC3) fielded more than 1,800 reports of crypto-focused romance scams in the first seven months of 2021, with losses topping $133 million.

Other scammers pose as legitimate crypto traders or set up phony exchanges to lure people into giving them money. Another con involves fraudulent sales pitches for “IRS approved” individual retirement accounts in cryptocurrencies. There are also straight-up hackers who break into the “digital wallets” where people store their virtual currency.

And crypto is creeping into everyday impostor scams, with crooks pretending to be government or lottery officials demanding payment in virtual currency for supposed debts, bills or prize fees, directing their targets to crypto ATMs and walking them through the transaction.

Warning Signs

• Someone you don’t know sends you a message out of the blue about a virtual currency investment opportunity. 
• The pitch claims that the investment involves no risk and surefire profits.
• A call, text, email or social media message claiming to be from a government agency, utility or other official body seeks a crypto payment to cover a bill, debt or fee.

How to protect yourself from this scam

• Do understand the risk. The virtual currency trade is speculative and volatile. As the FTC notes, “An investment that may be worth thousands of dollars on Tuesday could only be worth hundreds on Wednesday.” 
• Do resist pressure to buy right now. Scammers often try to create a false sense of urgency around a supposedly red-hot cryptocurrency.
• Do check out any dealer in virtual currency options or futures contracts before you buy. The U.S. Commodity Futures Trading Commission (CFTC) has a tool for running an online background check. 
• Do thoroughly research any virtual currency platform or digital wallet provider before providing any credit card information, wiring money or disclosing sensitive personal data.
• Do carefully read any agreement with a digital wallet provider. Unlike banks and credit card companies, they might not accept responsibility for replacing your money if it is stolen, the Consumer Financial Protection Bureau warns. 

• Don’t put money in a virtual currency investment if you don’t really understand how it works. 
• Don’t speculate in cryptocurrencies with money that you can’t afford to lose. 
• Don’t invest in or trade virtual currencies on the advice of someone you've only dealt with online, whether it's an anonymous tipster on social media or a supposed romantic partner.
• Don’t make cryptocurrency payments in response to threats over bills or promises of a prize. Government agencies and legitimate businesses do not demand payment in crypto. Anyone who does is a scammer.
• Don’t put money into an individual retirement account advertised as “IRS approved” or “IRA approved.” Some self-directed IRAs do allow investment in virtual currencies, but the Internal Revenue Service does not approve or review IRA investments. 
• Don’t share your “private keys” — the long letter-and-number codes that enable you to access your virtual currency — with anyone. Keep them in a secure place.

More Resources

• If you think you’ve been the victim of a virtual currency scam, contact the CFTC at 866-366-2382 or submit a complaint online. 
• You can also report cryptocurrency fraud to the FTC, the IC3 and the U.S. Securities and Exchange Commission.