FBI Warns of Cryptocurrency Scams and How to Avoid Them

The FBI has issued a warning about cryptocurrency scams, which are becoming increasingly common and sophisticated. Scammers are using fake websites, social media, and even phone calls to trick people into investing in fake cryptocurrencies.

These scams often involve fake initial coin offerings (ICOs) that promise unusually high returns. The FBI notes that these scams can result in significant financial losses for victims.

Investors should be cautious of unsolicited investment opportunities, especially those that seem too good to be true. Always research the company and its reputation before investing.

The FBI recommends verifying the authenticity of any investment opportunity by contacting the company directly and checking for any red flags, such as poor grammar or spelling in the website or communication.

Cryptocurrency is a digital or virtual currency that uses cryptography for security and is decentralized, meaning it's not controlled by any government or financial institution.

It's created and stored electronically in a public ledger called a blockchain, which allows for secure and transparent transactions.

Cryptocurrencies like Bitcoin and Ethereum have become increasingly popular in recent years, with some people using them to buy everyday items or invest in the market.

But what exactly is cryptocurrency, and how does it work?

You can obtain cryptocurrency through various methods. One way is to buy it through an exchange, which is a platform that allows you to trade traditional currencies for cryptocurrency.

Cryptocurrency exchanges can be accessed through websites or apps, making it easy to get started. Some people prefer to use a cryptocurrency ATM, which is a machine that allows you to buy cryptocurrency with cash.

Mining is another way to earn cryptocurrency, but it requires advanced computer equipment to solve highly complicated math puzzles.

Cryptocurrency accounts are not backed by a government, unlike traditional currency like U.S. dollars. This means that if something happens to your account or cryptocurrency funds, the government has no obligation to step in and help get your money back.

Cryptocurrency values change constantly, often rapidly, even by the hour. This can result in significant changes, making it a highly volatile investment.

The value of a cryptocurrency can change dramatically, sometimes by thousands of dollars in a short amount of time. For example, an investment worth thousands today might be worth only hundreds tomorrow.

Cryptocurrencies tend to be more volatile than traditional investments, such as stocks and bonds.

Paying with cryptocurrency is a whole different ball game compared to using credit cards or traditional payment methods.

Cryptocurrency payments don't come with the same legal protections as credit cards or debit cards. If something goes wrong, you're on your own.

Once you make a cryptocurrency payment, it's usually irreversible. You can only get your money back if the seller sends it back to you.

Before buying something with cryptocurrency, research the seller's reputation to minimize your risk.

Some information about your transactions might be public, even if you think you're being anonymous. Cryptocurrency transactions are recorded on a public ledger called a blockchain.

A blockchain is a public list of every cryptocurrency transaction, including the transaction amount, sender's wallet address, and recipient's wallet address.

Be cautious of unsolicited calls or messages from individuals claiming to be from the FBI, as they may be scammers trying to steal your cryptocurrency.

The FBI never contacts individuals to ask for cryptocurrency or other financial information.

Scammers often use fake websites or social media accounts to impersonate the FBI or other legitimate organizations, so be sure to verify the authenticity of any website or account before providing personal or financial information.

Fake websites may have slight variations of the FBI's real website, but they are often poorly designed and may have typos or grammatical errors.

If you receive a suspicious message or call, do not respond or engage with the scammer.

Reporting cryptocurrency scams can be a daunting task, but it's essential to take action if you suspect something is off.

Report fraud and other suspicious activity involving cryptocurrency to the authorities. This can help prevent further harm and bring scammers to justice.

These scams often involve confidence-enabled investment scams, where criminals use social engineering tactics to convince victims to trust them. They may pose as experts or know someone who can help achieve financial success.

Once trust is established, criminals introduce the topic of cryptocurrency investment, convincing victims to use fraudulent websites or apps to invest. Be extremely cautious of investment opportunities that come from someone you've never met in person.

Liquidity mining schemes are also a type of scam to watch out for, where victims are promised daily returns in the 1-3 percent range.

To avoid falling victim to cryptocurrency scams, be wary of ads promoting recovery services. Research the company thoroughly and watch out for vague language, minimal online presence, and promises of guaranteed fund recovery.

Scammers often claim affiliation with the FBI or police, so don't hesitate to contact your local FBI field office directly to confirm. If someone contacts you directly via phone, SMS, or email to offer crypto recovery services, do not release any financial or personal information.

If you've been contacted by a scammer, your personal details were likely compromised in a leak or data breach. Use a digital identity protection service like Bitdefender to instantly find out if your data has leaked online.

Crypto traders should be aware that police don't charge victims for investigating crimes. Be cautious of investment opportunities from individuals you've never met in person – if an investment opportunity comes from someone you've never met, be extremely cautious of the advice.

Liquidity mining schemes can also be scams, so do your research and be wary of promises of daily returns in the 1-3 percent range.

If you suspect a cryptocurrency scam, report it to the relevant authorities immediately. Report fraud and other suspicious activity involving cryptocurrency to the Financial Crimes Enforcement Network (FinCEN).

You can also report cryptocurrency scams to the Federal Trade Commission (FTC) online or by phone. The FTC has a dedicated team to handle complaints about online scams, including those involving cryptocurrency.

To report a cryptocurrency scam, you'll need to provide some basic information, including your name, contact details, and a detailed description of the scam. Be as specific as possible about the scam, including any relevant dates, times, and amounts involved.

Elderly people report the greatest losses, with over 69,000 complaints made to the Feds' Internet Crime Complaint Center (IC3) last year.

The bulk of these complaints came from those aged 60 and over, highlighting just how vulnerable the older generations are to internet scams.

Investment scams are the primary driver of the sharp increase in crypto-related losses, with a vast majority of cases geared toward promising malleable victims huge returns from their "investments."

Fewer than 35,000 complaints were made in 2021, the last time crypto scams saw any kind of downturn, but since then, annual losses have soared by multiple billions each year.

The number of yearly complaints has doubled in the past few years, with the FBI's director, Christopher Wray, saying "Scams targeting investors who use cryptocurrency are skyrocketing in severity and complexity."

Investment scams "with a nexus to cryptocurrency" incurred losses amounting to $3.9 billion alone – the only category of crypto-related financial fraud to exceed nine figures.