The roller-coaster ride for digital currency investors has been wild, and the recent plunge in prices has certainly left many with a big headache. But there's a larger, underlying problem that could have you reaching for the extra-strength aspirin. Some cryptocurrency investments are phonier than $3 bills. They are scams from the get-go. And investors who plunk down their hard-earned dollars in these shams can be left empty-handed.
Losses grew more than 10-fold
Almost 6,800 consumers reported more than $80 million in cryptocurrency-investment scam losses during the six months ending March 31, the Federal Trade Commission (FTC) warned this week. The median loss was $1,900.
As for the $80 million-plus that went down the drain, that represents more than a 10-fold jump in losses from the same period a year earlier, when there were 570 complaints and $7.5 million in losses reported to the FTC.
Here are 10 things the consumer protection agency wants people to know if they don't want to lose their shirts to crypto scammers.
1. Some scammers impersonate Elon Musk, the billionaire entrepreneur whose tweets can stir the crypto market. The FTC received reports of more than $2 million in such losses due to Musk impersonators between October 2020 and the end of March 2021. A common scam “involves a promise that a celebrity associated with cryptocurrency will multiply any cryptocurrency you send to their wallet and send it back,” the FTC cautions.
2. Government agencies have had their identities hijacked, too. Many victims reported loading cash into a Bitcoin ATM (a kiosk lets you buy and sometimes also sell Bitcoin) to pay crooks claiming to be from the Social Security Administration. Its Office of Inspector General issued a related warning early this year.
3. Crypto scams start in a variety of ways. They may begin with offers of investment “tips” or “secrets” in online message boards that lead people to bogus websites touting what appear to be chances to invest in or to mine popular cryptocurrencies such as Bitcoin and Ethereum.
4. The bogus websites sow confusion. They use fake testimonials and cryptocurrency jargon to appear credible, “but promises of enormous, guaranteed returns are simply lies,” the FTC states. These sites even may make it appear that your investment is growing. But consumers who have been ripped off have complained that when they tried to withdraw the purported profits, “they are told to send even more crypto — and end up getting nothing back."
5. Romance fraudsters lurk behind many crypto scams. Many victims said they thought they were in a long-distance relationship when their new “love” started chatting about a hot crypto opportunity he or she had acted on. About 20 percent of the money people reported losing in romance scams in general during the six months ending March 31 was sent in cryptocurrency. Some $35 million was reported lost from 1,147 such reports, indicating a romance scammer was bankrolled by a victim who sent cryptocurrency. Victims “thought they were investing,” the FTC says.
6. Promises, promises. Guarantees of huge returns and claims that your cryptocurrency will be multiplied always signal a scam.
7. Cryptocurrencies can be legitimate investments. Investors make money by selling their cryptocurrency for more than they paid, but there's no guarantee its value will go up. “Don't trust people who say they know a better way,” the agency says.
8. Younger adults are more vulnerable to these scams. Consumers ages 20 to 49 were more than five times as likely than older people to report losing money to a crypto investment scam during the six months examined.
9. Consumers in their 20s and 30s lost more money to investment scams in general than any other type of fraud. More than half of this age cohort's losses were — you guessed it — in cryptocurrency.
10. The bottom line: “If a caller, love interest, organization or anyone else insists on dealing in cryptocurrency, you can bet it's a scam,” the FTC says.
Katherine Skiba covers scams and fraud for AARP. Previously she was a reporter with the Chicago Tribune, U.S. News & World Report, and the Milwaukee Journal Sentinel. She was a recipient of Harvard University's Nieman Fellowship and is the author of the book, Sister in the Band of Brothers: Embedded with the 101st Airborne in Iraq.