Cryptocurrencies are a new part of our financial world but are quickly growing in popularity. One of the most well-known is Bitcoin, which has quickly grown in value over the past decade.
Both investors and criminals are trying to profit off this new technology, however.
“Crypto is both new and crypto is hot,” said Christopher Leach, an attorney at the Federal Trade Commission who focuses on consumer protection. “A lot of people are making a lot of money and people sitting at home might be thinking they want to get in on that, too.”
Bitcoin and other crypto-currencies are all the rage, but what exactly are they, and how do they work?
Cryptocurrencies are digital forms of payment that only exist online. The FTC says bitcoin and Ethereum are two of the most well known, but new ones are being created all the time.
In a new report, the FTC said that between October 2020 and the end of March 2021, it received more than 7,000 complaints of cryptocurrency-related scams totaling more than $80 million. That’s more than 10 times the reported crypto scams from the same period the year before. Unfortunately, often these scams end with the money vanishing.
“This isn’t like somebody fraudulently gets access to your credit card and you ask the company to reverse the charges,” Leach said. “With cryptocurrency, you largely can’t do that.”
Leach said that investment scams are nothing new, but now criminals are preying on the excitement people have for cryptocurrency.
“They’ll say, ‘Give us your cryptocurrency and we’ll make it grow 2 times, 3 times, 10 times,'” Leach said. “They pose almost as a broker or dealer or investment adviser.”
People who have been investing in cryptocurrencies for years know the dangers that come with the territory.
“I’m pretty cautious about where I go to get it,” said Jarom Olson, who’s been investing in cryptocurrencies for five years. “When there’s a lot of hype around it, there’s some people that will take advantage of the hype without adding any actual value.”
Both Olson and Leach said the people likely to fall for scams don’t know much about cryptocurrency.
“They know people are making lots of money but don’t quite understand how,” Leach said. “For people in their 20s and 30s, cryptocurrency scams are the largest form of investment scams.”
Olson said that if you genuinely want to start, do your research.
“Don’t mess with the new ones you don’t understand until you get a good foundation in the big ones first,” Olsen said. “A lot of people are buying cryptocurrencies as a gamble, like a lottery ticket, and they have no idea what’s actually behind it, who made it, or why it exists.”
The FTC said that people over 50 are losing larger sums of money to these cryptocurrency scams than twenty- and thirtysomethings.
“If anyone is promising guaranteed returns, sky-high returns, get rich quick, those are red flags of a scam,” Leach said. “This is the same old playbook but with a new kind of financial instrument.”
With cryptocurrencies being digital, they can be closely tied to online trends on social media, which is another way criminals are trying to steal cryptocurrency from people. The FTC said people have lost more than $2 million to Elon Musk impersonators online.
“They say, ‘Give us cryptocurrency and you can have a chance to win a lot more cryptocurrency,” Leach said.
The FTC encourages anyone who thinks they might have been the victim of a cryptocurrency-related scam to report it. You can learn how to do that here.
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