We keep hearing about the potential of Bitcoin and other cryptocurrencies, but as they have developed over the years, these have often been used for criminal activity.
Cryptocurrency has been an attractive payment method for criminals selling drugs and stolen credit cards on darknet markets and to collect money from victims of ransomware attacks. In addition, hackers have often stolen cryptocurrency from online exchanges and defrauded investors with Ponzi schemes and similar fraud. There are reports that $14 billion of cryptocurrency was stolen globally in 2021.
The BBB has recently seen a dramatic increase in reports that scammers are now reaching out to the general public. The number of BBB Scam Tracker reports involving cryptocurrency doubled in 2021 and tripled from two years ago.
In other words, more cryptocurrency scams are now aimed at the consumers, and the trend is accelerating. Other agencies both here and in Canada are seeing similar problems. So the International BBB System decided to do a study on this topic to see what has been and what might be done.
What kinds of scams are consumers reporting? They mainly fall into two buckets: Investment scams and payment for more traditional scams. At times, these scams rely on fake celebrity endorsements to lend credibility to their claims, dropping names like Elon Musk.
Victims most commonly find investment frauds on social media, and frequently they believe that a friend has contacted them who supposedly has made money and urges the victim to follow suit.
Victims are directed to send Bitcoin or other cryptocurrency to a company that has a very professional looking website where victims can set up a username and password. These sites even have live customer service.
Victims can log in and monitor their accounts, which shows their investments rapidly increasing. But when they try to withdraw money, they are told that they must first pay taxes – by sending more money through cryptocurrency. And then there are demands for additional fees. In short, no one can get their money out and they lose everything.
Romance scammers are increasingly changing their fraud scenario from needing money for an emergency to encouraging victims to invest in cryptocurrency. The scammers may even claim that they have contributed their own money to the victim’s account and therefore have a stake in its success. But all the money is ultimately stolen.
Second, scammers are asking for Bitcoin as a payment method for other types of scams. The number one complaint to BBB about using cryptocurrency as a payment method is about online shopping — paying for goods found online.
Most of these reports are about pet scams, where pets that don’t really exist are offered for sale online. Scammers are now asking victims to pay with Bitcoin. The second most common are employment scams, often offering jobs that sound legitimate, but which really involve becoming a money mule and laundering money from other victims.
This category also includes fake check scams, where victims are offered a job but told that they need a special laptop or other equipment to do the work. They receive a business check, which they deposit in their bank. After the bank credits their accounts, victims believe the check is good. Scammers then ask them to pay the supplier of the laptop with Bitcoin.
But the check is counterfeit and the bank wants the money back.
There are more. Other scams that have started asking for payment with Bitcoin include advance fee loan scams — asking for upfront fees to receive a loan — Social Security impersonators, tech support scams and lottery frauds.
It is becoming easier to send money to scammers with Bitcoin. Last year, thousands of Bitcoin ATMs were installed across the U.S. and Canada, with at least 30,000 in the U.S. and 2,235 in Canada. There is probably one in your neighborhood. They are in gas stations, convenience stores, and even many Walmart stores. Though many Bitcoin ATMs carry signs warning about scams, victims only need to insert $20 bills, scan a QR code that the scammers provide, and their money can be off to anywhere in the world.
Here are six tips for anyone considering using cryptocurrency:
1. Transactions sending cryptocurrency cannot be reversed. It is like sending cash.
2. It is critical to safely secure wallets containing cryptocurrency. These are like keys. Watch out for phishing scams and make sure you know who you are dealing with.
3. Make certain that the web address of any exchange or other site is the real one. Fake web sites are common and look professional.
4. If you are urged to invest in cryptocurrency or by a romantic interest, it is likely a scam. Talk to friends directly by phone to be sure someone has not hacked their social media account.
5. Claims of a guaranteed return on a cryptocurrency investment are always false.
6. Don’t rely on claims that a celebrity has endorsed a cryptocurrency.
Eppstein is president of the Better Business Bureau, serving Northwest Ohio and southeastern Michigan.