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BBB warns of rise in cryptocurrency scams
SOURCE: WIBW.COM
MAR 27, 2022
TOPEKA, Kan. (WIBW) - The Better Business Bureau has warned in a rise in scams involving cryptocurrency and has given residents tips to avoid them.
The Better Business Bureau says cryptocurrency is the hottest new trend in investing and much is still not understood about the digital payment system that does not rely on banks to verify transactions. It said this has created the perfect environment for scams according to its latest in-depth study, which states, “A virtual tug of war exists between the legitimate and fraudulent use of cryptocurrency.”
The BBB said the study, titled Cryptocurrency scams: BBB study finds lack of regulation and consumer education results in a dramatic increase in fraud and financial losses, details the many layers of cryptocurrency and the ways criminals have exploited the market to steal from investors and victims of common scams.
“This groundbreaking study sheds light on the latest series of scam trends we’ve monitored,” said BBB President and CEO Jim Hegarty. “Cryptocurrency is here to stay, and we want to ensure our communities are aware of the potential for scam-related activity in these relatively new markets.”
The Bureau said a cryptocurrency is a form of digital money that allows encrypted technology to enable anyone anywhere to send and receive payments. It said it does not exist in a physical form like paper money but as lines of computer code supported by a decentralized computer system known as a blockchain and stored in a crypto wallet.
BBB said Bitcoin, developed in 2009, is the most popular form of cryptocurrency and is available for purchase at tens of thousands of Bitcoin ATMs and is increasingly accepted as payment in retail transactions. It said Ethereum is the second most common and is centrally involved in the increasingly popular non-fungible tokens - NFTs - digital assets like pictures or music purchased with crypto as an investment.
Critically, the Bureau said cryptocurrency operates outside traditional banking systems and is not subject to the same protections as bank deposits or credit card transactions.
BBB said reports from victims of large financial losses to crypto-related scams have skyrocketed. In 2021, it said it received over 2,400 complaints with monetary losses of almost $8 million involving crypto companies. It said the BBB Scam Tracker reports tripled between 2019 and 2021 and reported losses tripled over the past two years.
The Bureau said cryptocurrency accounted for the second-highest scam losses reported to the Federal Trade Commission in 2021, with losses of $750 million. It said the FBI’s Internet Crime Complaint Center and the Canadian Anti-Fraud Centre also had major increases in reports received and losses.
The report notes most residents do not make a report when they are scammed, so suggested losses could be substantially greater.
BBB said crypto has some key characteristics which make it attractive to scammers. It said crypto is relatively unregulated and difficult to recover when lost; it is wildly popular, fueled by celebrity endorsements; and is not well understood by the general public.
The study indicates cryptocurrency markets offer new opportunities for tried-and-true investment frauds like Ponzi schemes and fraudulent ICOs - initial coin offerings - particularly given the development of new currencies and the lack of protections government regulation has made available to more traditional investors.
The Bureau said many victims report after they purchase crypto, they were directed to websites where they had to make an account to monitor investments. It said the websites are sophisticated with many offering live customer service chats. However, it said victims who want to withdraw their “earnings” are told they need to pay more money to cover taxes, commissions or other fees. Ultimately, it said customers can never withdraw the money.
A consumer told BBB she had started to learn about Bitcoin investing in the summer of 2021 and reached out via WhatsApp to an investing service she saw repeatedly mentioned in the comments of a YouTube video about Bitcoin. She said she was ordered to by $1,500 in Bitcoin via CashApp and 10 days later, she received a screenshot that showed an account balance of over $7,300.
However, BBB said when the woman tried to withdraw her earnings, she was told to pay a 10% commission and a broker’s fee of over $800. After she paid both, it said she received an email that ordered her to pay an additional $1,200 to withdraw the money. She concluded it had been a scam and reported it to the Bureau.
BBB Scam Tracker data indicates crypto scams most commonly originate on social media, with the FTC noting about 25% of crypto fraud reported in 2021 started on social media. It said scammers can impersonate a victim’s friend to tell them about their success in crypto investing or they may make posts promising big gains.
The Bureau said cryptocurrency figures prominently in other scams as well. It said law enforcement reports that romance scammers have started to convince victims to invest in crypto via sophisticated fake apps, disappearing with the money when the victim tries to withdraw the funds. It said ransomware scams also demand crypto as payment in many cases according to its notes.
BBB Scam Tracker data shows crypto also is a commonly requested payment method in fraudulent online sales, advance fee loan scams, employment scams, extortion scams, government impostor fees and more. It said illicit transactions on the dark web are often conducted using crypto and it is used in money laundering.
The Bureau said law enforcement agencies have pursued cases that involved large cryptocurrency losses and the use of crypto in criminal activity. It said the U.S. Department of Justice has made arrests in 2022 in cases that involved billions of dollars in crypto laundering.
BBB offered the following tips to help residents avoid cryptocurrency scams:
The Bureau recommended the industry and regulates do the following:
To report a scam or register a complaint, visit the following:
To read the full study, click HERE.
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