Cryptocurrency seems to be everywhere right now. On the evening news, we hear how the latest cryptocurrency has skyrocketed in value. Daily, it seems there are new businesses accepting cryptocurrency as payments for services. We even have celebrities endorsing (or disparaging) these new alternative forms of payment, which can have outsized effects on their values.
Many people are now using cryptocurrency as a strategy to diversify their investment portfolios. First-time investors see it as good way to either start investing or make some easy money. However, as with anything new, you need to do your research to make sure it is right for you. You also need to be on the lookout for scams.
The following article – "Spotting Cryptocurrency Investment Scams," by Cristina Miranda of the Federal Trade Commission – provides some tips on spotting these investment scams.
Spotting Cryptocurrency Investment Scams
Cryptocurrency has gotten lots of attention as a new way to invest. But here’s the thing: scammers are taking advantage of people’s understanding (or not) of cryptocurrency investments, and how they work. And younger people are losing big.
In fact, the FTC’s new data spotlight shows that, since October 2020, nearly 7,000 people reported losses to bogus cryptocurrency investments, adding up to more than $80 million. People ages 20-49 were more than five times more likely than other age groups to report losing money on those scams. But here’s an even more striking point: people in their 20s and 30s have lost more money on investment scams than on any other type of fraud. And more than half of their reported investment scam losses — $35 million — were in cryptocurrency.
Cryptocurrency investment scams can happen in many ways, but they’re all full of fake promises and false guarantees. Scammers might post investment sites that look real, but you’ll find you can’t withdraw the money you’ve “invested.” Others pretend to be celebrities — like a would-be Elon Musk — doing giveaways with claims of multiplying any cryptocurrency you send. Scammers also use online dating sites to sweet-talk people into bogus crypto investments in the name of love.
If you’re thinking about investing in cryptocurrency:
- Research before you invest. Search online for the company and cryptocurrency name, plus “review,” “scam,” or “complaint.”
- Be wary of guarantees and big promises. Scammers often promise you’ll make money quickly, or that you’ll get big payouts or guaranteed returns. They might offer you free money paid in cash or cryptocurrency — but, even if there’s a celebrity endorsement, don’t buy it. You’ll make money if you’re lucky enough to sell your crypto for more than you paid. Don’t trust people who say they know a better way.
- Anyone who says you have to pay by cryptocurrency, wire transfer, or gift card is a scammer. If you pay, there’s usually no way to get your money back.