New Currency, New Scams
Confused about cryptocurrencies like Bitcoin, Ethereum, and Dogecoin? You’re not alone. Before you use or invest in cryptocurrency, you should know what makes it different from cash and how to spot cryptocurrency scams.
What is cryptocurrency?
Cryptocurrency is essentially digital currency that only exists electronically. There is no physical coin or bill unless you use a service that allows you to cash-in for a physical token or amount of money. Exchanges of cryptocurrency are done online, with your phone or computer, without using a middleman like a bank. Bitcoin and Ethereum are well-known cryptocurrencies, but there are many different cryptocurrency brands, and new ones are continuously being created. For example, Dogecoin has recently grown in popularity and has a very active community in the cryptocurrency world, but while it is well-known, it may not be a very effective store of value. To learn more about Cryptocurrency, and the potential scam risks, check out this article from the Federal Trade Commission.
Avoid Cryptocurrency Scams
As the use of cryptocurrency is growing, so are the scams. It’s important to remember that cryptocurrency doesn't come with legal protections and cryptocurrency transactions can't be reversed. Scammers can use these traits to rip people off. Unlike your credit card, you can't dispute a purchase and get your money back. Once a transaction is completed, it is impossible to cancel or reverse. For this reason, your alarm bells should be ringing if you make a purchase that requires you to pay with cryptocurrency. Here are some specific cryptocurrency scams to watch out for.
1. Investment opportunity scams
Some people have made a lot of money by investing in cryptocurrency. Before you make an investment, research the name of the company and type of cryptocurrency you are investing in. As you do your research, add words to your search like "scam," "complaint," and "review." Be wary of investment opportunities that promise guaranteed returns, especially if the company is lacking in explanation and details for why your investment will do well.
2. Blackmail emails
Scammers will often send emails that say they have embarrassing or compromising personal information about you, and then threaten to make the information public unless you pay them in cryptocurrency. Don’t do it. This is blackmail and a criminal extortion attempt. Report it to the FBI immediately.
3. Social media scams
If you read a tweet, text, email, or get a message on social media that tells you to send cryptocurrency, it’s very likely a scam. Even if you know the person contacting you, it could be that their account has been hacked. Report the scam immediately to the social media platform, and then tell the FTC at ReportFraud.ftc.gov.
How To Report Cryptocurrency Scams
Report fraud and other suspicious activity involving cryptocurrency to:
- The FTC at ReportFraud.ftc.gov
- The Commodity Futures Trading Commission (CFTC) at CFTC.gov/complaint
- The U.S. Securities and Exchange Commission (SEC) at sec.gov/tcr
- The cryptocurrency exchange company you used to send the money
Other Useful Resources