Cryptocurrency world is ripe for fraud and financial loss
Josh Planos,
Nebraska Examiner
April 20, 2022
A hacker at work (Shutterstock)
The Los Angeles Rams won Super Bowl LVI, but an argument could be made that cryptocurrency finished as the runner-up. Digital currency providers eToro, Crypto.com and FTX ran spots on advertising’s biggest stage. So did Coinbase, a cryptocurrency exchange, which spent nearly $14 million on an ad that featured a bouncing QR code. It performed so well that it temporarily crashed the app.
Digital currencies and payment systems have existed in some form or fashion for more than a decade, but the Super Bowl felt like a watershed moment for a relatively new international economy that exists as lines of computer code. Crypto had gone mainstream.
The popularity of cryptocurrency ads spiked in the days following the Super Bowl, amplified by the star power — LeBron James, Larry David and Matt Damon, to name a few — hawking it. But volatility is a constant in the crypto space, and headlines in recent weeks have been concerning:
A man in Plano, Texas, came forward after losing more than $220,000 in a scam.
April 20, 2022
A hacker at work (Shutterstock)
The Los Angeles Rams won Super Bowl LVI, but an argument could be made that cryptocurrency finished as the runner-up. Digital currency providers eToro, Crypto.com and FTX ran spots on advertising’s biggest stage. So did Coinbase, a cryptocurrency exchange, which spent nearly $14 million on an ad that featured a bouncing QR code. It performed so well that it temporarily crashed the app.
Digital currencies and payment systems have existed in some form or fashion for more than a decade, but the Super Bowl felt like a watershed moment for a relatively new international economy that exists as lines of computer code. Crypto had gone mainstream.
The popularity of cryptocurrency ads spiked in the days following the Super Bowl, amplified by the star power — LeBron James, Larry David and Matt Damon, to name a few — hawking it. But volatility is a constant in the crypto space, and headlines in recent weeks have been concerning:
A man in Plano, Texas, came forward after losing more than $220,000 in a scam.
A poker player in Las Vegas was charged in connection with a $500,000 Bitcoin trading scam.
Meta was sued by Australia’s consumer protection committee over scam advertisements for crypto schemes endorsed by celebrities.
Andrew Bailey, governor of the Bank of England, called cryptocurrency the new “front line” for scams.”
These headlines mirror the findings of a study released in late March by the Better Business Bureau’s International Investigations Initiative, which found that the industry is ripe for fraud and financial loss.
Reports received to BBB Scam Tracker about fraudulent activity have tripled in the past three years, the study found.
BBB received 2,465 complaints in 2021 with losses totaling $7,933,474. These are conservative figures, given that the vast majority of fraud goes unreported. Cryptocurrency was found to be used as a new payment method in old scams, such as the fraudulent sale of goods online, advance fee loans, employment and romance scams.
Those between the ages of 25 and 34 were the most likely to report cryptocurrency scams, followed by those between 35 and 44. Almost equal numbers of men and women reported these scams.
In some cases, victims were targeted by rug pulls, where a scammer convinces people to invest in a new project by trading in their cryptocurrency for a new token that doesn’t exist. Others had their account information hacked or were directed to fake websites, where personal information was stolen.
Most fraud reports involved Bitcoin, which accounted for some 90% of reports. Ethereum followed as the second most common.
Availability of Bitcoin ATMs or kiosks made it easier for victims to exchange with scammers. These ATMs allow users to purchase or send money around the globe. There are tens of thousands of U.S. Bitcoin ATMs, including at least 10 in the Omaha and Lincoln metro areas, according to RockItCoin’s ATM finder. Although they are regulated by FinCEN in the U.S. and registration is required, scammers have been known to request payment with them.
The irreversibility of these transactions makes cryptocurrency a lucrative playground for scammers. Safeguards and regulations baked into standard financial systems aren’t found in the crypto space, so there is no protection like you’d find with check deposits or chargebacks to credit and debit cards.
Romance scams, one of the costliest frauds monitored, began requesting money in cryptocurrency.
Your BBB advises to be wary of:
Sharing your cryptocurrency wallet
Unfamiliar email addresses and website addresses
Paying with cryptocurrency for products
Fake recovery companies and reviews
Social media celebrity endorsements, claims and “friends”
Crypto apps from unfamiliar sources
Promises of guaranteed returns
There are no signs these harrowing numbers will subside. Complaints are rapidly increasing, and the FBI’s Internet Crime Complaint Center recently noted that cryptocurrency is now considered the preferred payment method for all types of scams.
It’s imperative that those affected speak out and report the damages. Those who experience scams are encouraged to report them to BBB Scam Tracker.
Nebraska Examiner is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Nebraska Examiner maintains editorial independence. Contact Editor Cate Folsom for questions: info@nebraskaexaminer.com. Follow Nebraska Examiner on Facebook and Twitter.
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