Jennifer Bergman
Do you keep hearing about cryptocurrency either while working with investments, payments or the most common hot topic, scams? Confused? You’re not alone. Before you convert your real dollars or invest in cryptocurrency, let’s look at what makes it different from cash or other payment methods, and how to recognize cryptocurrency scams.
So, what is cryptocurrency, in simple words?
Cryptocurrencies are digital tokens/money that only exist electronically and do not require a bank or financial institution to verify the transactions. The digital currency allows people to make payments, purchases or investments directly through an online system, such as your phone, computer, or a cryptocurrency ATM. Cryptocurrencies have no established or real value; they are simply worth what people are willing to pay for them in the market. Two well-known cryptocurrencies are Bitcoin and Ether, but there are many different cryptocurrencies, and new ones keep continue to be created.
Ok, so what is the difference between Crypto and the traditional payment methods?
Cryptocurrency exists only online and is not backed nor insured by the government like the US dollar. It also does not come with legal protections. If something happens to your digital account or cryptocurrency funds — for example, the company that provides storage for your wallet goes out of business or is hacked — the government has no responsibility to step in and help get your money back. Unlike your traditional bank or credit card, there is no established process to help get your money back or dispute a purchase. Crypto payments are not reversible. Their value can change quickly, even changing by the hour, and that change can be significant, making it more unpredictable than more traditional investments.
Alright, so what are some types of Cryptocurrency scams?
When dealing with Cryptocurrency you should take every step possible to prevent yourself from falling victim to scammers. Part of this process is familiarizing yourself with some of the most common scams:
- Fake Cryptocurrency Websites - Scammers spoof a recognized website or create a fake website to trick victims into purchasing cryptocurrency.
- Crypto Phishing Scams - Scammers often use fake websites to try to obtain access to a person's personal information or a person’s cryptocurrency wallet.
- Fake Celebrity Endorsements - Scammers will post pictures of a celebrity or influencer, falsely claiming that the celebrity made a lot of money using their financial services app or program. These organizations might contact you through social media, sending you links or QR Codes, and if you click that money will go straight to a scammer and it’ll be gone.
- Cryptocurrency Donations - Scammers will often set up a fake website that poses as a legitimate charity or, in some cases, a completely made up one. These websites focus on taking advantage of a person's charitable tendencies to steal their money.
- Blackmail Scams - Scammers might send emails or U.S. mail to your home saying they have embarrassing or compromising photos, videos, or personal information about you. Then, they threaten to make it public unless you pay them in cryptocurrency.
- Business Scam - Scammers impersonating government agencies, law enforcement, or well-known companies. They pretend to be someone you trust to convince you to send them money by buying and sending cryptocurrency.
- Romance Scams - An online “love interest” wants you to send money or cryptocurrency to help you invest. As soon as someone you meet on a dating site or app asks you for money, or offers you investment advice, know this: that’s a scammer.
To spot a crypto scam or any scammer, you need to be on the lookout for the common “Red Flags”. These include unrealistic promises, sense of urgency or high-pressure sales tactics, poorly designed websites, no clear information, social media manipulation, or even pyramid schemes. Remember, do not pay anyone who contacts you unexpectedly, demanding payment with cryptocurrency. Specifically, if they are asking you to drive to a cryptocurrency ATM to place the money in immediately. No legitimate business will ever email, text, or message you on social media to ask for money even if it seems to come from a company you know. You should never click on a link from an unexpected text, email, or social media message. And if someone asks you to pay upfront or says to buy cryptocurrency, it’s a scam.
How do I steer clear of these crypto con scams?
Stay informed about cryptocurrency and scams. There are thousands of cryptocurrencies available, so it’s important to educate yourself. If you are contacted to buy or sell cryptocurrency, be extremely cautious about responding and if there's a hint of doubt – do not do it.
Do your due diligence. Never invest or purchase without doing thorough research. Be skeptical of any platform that promotes a guaranteed return. Remember, there's no such thing as a free lunch.
Practice good cyber hygiene. Use long passwords, two-factor authentication and update all your software in a timely manner. Do not share your private information with anyone.
Check out charities before donating. Verify any charitable organization by searching online.
