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Cryptocurrencies such as Bitcoin, Ethereum, Solana and hundreds more are a hot commodity in online trading, and it’s possible for a smart investor to make a big profit. But the prospect of quick riches can blind some people to the risks and enable crooks to lure them into scams.
This virtual money isn’t backed by any government or central bank. Even so, you can use “crypto” to buy goods and services, exchange it for U.S. dollars and other conventional currencies on digital markets, and even obtain it at specialized ATMs.
But unlike government-backed money, the value of virtual currencies is driven entirely by supply and demand. That can create wild swings that produce big gains for investors, or big losses. And crypto investments are subject to far less regulatory protection than traditional financial products like stocks, bonds and mutual funds.
Cryptocurrency fraud has taken a quantum leap in recent years. The Federal Trade Commission (FTC) received nearly 6,800 complaints of cryptocurrency investment scams from October 2020 through March 2021, up from 570 in the same period a year before. Reported losses grew more than tenfold to above $80 million.
For all cryptocurrency’s high-tech gloss, many of the related scams are just newfangled versions of classic frauds. For example:
Bogus websites. Phony sites festooned with fake testimonials and studded with crypto jargon promise huge, guaranteed returns on investments.
"Celebrity" endorsements. Con artists posing online as billionaires or other big names promise to multiply your investment in crypto but instead pocket what you send.