Cryptocurrency was supposed to change the way we handle money. We kept hearing from influencers and 'experts' about how this gives them complete control over their cash and how safe it is.
However, scammers have shown that cryptocurrencies are not as foolproof as promised. It's actually very easy to steal. The FBI reported that Americans lost $5.6 billion to cryptocurrency fraud in 2023, an increase of 45% from the previous year.
More than 69,000 people filed complaints with the federal government's Internet Crime Complaint Center (IC3) last year, most of them over the age of 60.
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Cryptocurrency illustration. (Kurt “Cyber Guy” Knutson)
The most common cryptocurrency scams
of FBI IC3 Report highlighted a variety of cryptocurrency scams, most of which include strong social engineering tactics.
investment fraud
First, there is investment fraud. Scammers will contact you by phone, text, or email and promise huge (unprecedented) profits if you invest in cryptocurrencies. They say everyone invests and makes huge returns, and if you don't, you're missing out. This usually works for people who are keen to invest but don't know how to get started – people who have money to invest but are not very tech savvy. Losses from investment fraud schemes reported to IC3 increased by 53% from $2.57 billion in 2022 to $3.96 billion in 2023.
Relationship building scam
Scammers may build a relationship with you to make the scam seem legitimate. They use dating apps, social media, professional networking sites, or encrypted messaging apps to get closer to their targets. Once they gain trust, they start investing in cryptocurrencies. They may claim that they have some expertise or know someone who can help you make a lot of money. And they encourage you to invest in cryptocurrencies using fake websites and apps that they control.
To make matters worse, scammers may target the same person again by posing as a fake crypto recovery expert. They promise to help the first crook recover the money he stole, but end up taking more cash and disappearing with it. ”There's one thing these scammers usually don't do. It's about not meeting you in real life. ” said federal officials.
A graph detailing complaints about cryptocurrencies. (IC3)
How to avoid becoming a victim of a moving scam
Scammers are targeting the elderly
Cryptocurrency scammers primarily target people over the age of 60, especially those who are less tech-savvy. According to the Fed, most complaints received in 2023 (about 16,806) came from this age group. These scams resulted in a total loss of more than $1.6 billion. Looking at the complaints across all age groups, it is clear that the losses are enormous. Here's a breakdown of complaints and losses in 2023 by age group.
- Under 20 years old: 858 complaints, $14.7 million in losses
- 20-29: 6,258 complaints, $168.6 million in losses
- 30-39: 10,849 complaints, $693.7 million in losses
- 40-49: 10,318 complaints, $843.9 million in losses
- 50-59: 8,918 complaints, $901.1 million in losses
- Over 60 years old: 16,806 complaints, $1.65 billion in losses
“Individuals in the 30-39 and 40-49 age groups filed the most crypto investment fraud complaints (approximately 5,200 reports in each age group), while individuals 60 and older filed complaints. reported the most losses (more than $1.24 billion). said the FBI report.
Illustration of a cryptocurrency scammer. (Kurt “Cyber Guy” Knutson)
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What you need to know before starting cryptocurrencies
There's a lot we don't know about cryptocurrencies and crypto fraud, so for some expert insight, I asked CEO Paige Schaefer. Iris Powered by Generalias a provider of proprietary identity and cyber protection platforms, there are several questions many of us have in mind.
1. What steps should I take if I suspect I have been a victim of cryptocurrency fraud?
“If you suspect you have been the victim of a cryptocurrency scam, it is important to act quickly to mitigate potential losses. First, immediately stop all transactions with the suspected fraudster. This includes stopping any ongoing investments, withdrawals, or deposits to prevent further transactions.'' Then change your password to take effect. two-factor authentication If you haven't already done so, please do so for all relevant accounts. This includes your email address and any other linked financial accounts. ”
Also, password manager Securely store and generate complex passwords. It helps you create unique, hard-to-crack passwords that hackers can never guess. Then, it keeps track of all your passwords in one place and enters them for you when you log into your account, so you don't have to remember them yourself. The fewer passwords you remember, the less likely you are to reuse them on your account. Learn more about me Here are the best password managers of 2024, reviewed by experts.
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2. How can individuals verify the legitimacy of a cryptocurrency exchange or platform before investing?
“Before investing in cryptocurrencies, search online for company or individual names, the cryptocurrency name, and words such as ‘reviews,’ ‘scam,’ and ‘complaints.’ Find out what others are saying. Also, while positive news about partnerships or technological advancements can be a good sign, reports of security breaches or legal issues are red flags.
Popular exchanges like Binance, Coinbase, and Kraken have a history of security and transparency, unlike many smaller, lesser-known platforms that can be fraudulent or easily hacked.
3. Are there any specific security measures I should implement to protect my digital wallet and cryptocurrency assets?
“A strong, unique password and two-factor authentication A must-have for digital wallets and crypto assets. Hardware wallets are also recommended when storing large amounts of crypto assets, as they are not connected to the internet and offer better protection against hacking. It is important to regularly update your wallet software to ensure that vulnerabilities are fixed. ”
4. What advice would you give to someone who is interested in investing in cryptocurrencies but is worried about the possibility of fraud?
“It is wise to be concerned about fraud in the world of cryptocurrencies. So you are already on the right path. Keep this mindset and know that there are safe ways to invest in cryptocurrencies. Start by investing time in researching and understanding different cryptocurrencies, including market trends, technical foundations, community and developer activity, compliance with regulatory standards, and robustness. Only use trusted exchanges and wallets that offer security measures.
How scammers are using your personal data for financial fraud and how to stop it
5 other important ways to protect yourself from cryptocurrency scams
1. Be skeptical of offers that seem too good to be true. One of the biggest red flags in cryptocurrency scams is that they promise huge, guaranteed profits with little to no risk. Scammers often lure people with claims that their investment will double or triple in a short period of time. Always approach these offers with caution, as legitimate investing does not guarantee a profit.
2. Avoid sharing personal information. Your personal information is the gateway to your crypto assets, and scammers often try to trick people into sharing sensitive information such as private keys, passwords, and wallet information. Do not share this data with anyone, even if they claim to be from a legitimate company or exchange. Please be especially careful phishing email Or a fake customer service representative asks for your details. Reputable companies will never ask for this type of information.
3. Install strong antivirus software on all devices. The best way to protect yourself from malicious links that can install malware and access your personal information is to install antivirus software on all your devices. This protection also warns you about phishing emails and ransomware scams, keeping your personal information and digital assets safe. Get my picks for the best antivirus protection products of 2024 for Windows, Mac, Android, and iOS devices.
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4. Be careful of unwanted contacts. Scammers often pose as friends, financial advisors, crypto experts, etc. and reach out to potential victims through social media, dating apps, professional networking platforms, and even email. If someone you don't know offers you an investment opportunity, claims to have inside information, or urges you to take immediate action, that's a big red flag.
5. Delete your personal information from the internet. Removing personal information from the web is key to preventing scammers from contacting you. Data deletion services allow you to remove data from databases and websites that are exposed to cybercriminals. Taking this step reduces your risk of becoming a target for scammers who use your information to trick you into downloading malware or giving out passwords to your personal accounts. Check out the data deletion services I recommend here.
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Cart important points
Cryptocurrency may seem like a great way to make money, but it comes with a lot of risks and should be avoided unless you are very tech-savvy. I'm not against technology per se. Technology has the potential to deliver on all its promises. However, because cryptocurrencies eliminate intermediaries such as banks, they also open the door for criminals to misuse cryptocurrencies for purposes such as theft, fraud, and money laundering.
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