We’ve all been warned for years about cyber criminals trying to steal our passwords and personal information to gain access to bank accounts or steal our identities. Phishing and smishing attacks—sending fake emails (phishing) or texts (smishing) that seem to be from reputable companies to get us to reveal personal or financial information, click on suspicious links, or download harmful software—are, unfortunately, commonplace today.
But these types of attacks aren’t the only ones threatening to empty our wallets. The Federal Trade Commission reports that more than 46,000 people fell victim to cryptocurrency (a.k.a. “crypto”) scams, losing more than $1 billion in the 18-month period from January 2021 to June of 2022, and that number is on the rise.
But, wait, you say, “I am not a millionaire, so I am not a target for these scammers.” Think again.
Crypto scams are on the rise, and they are targeting individuals at all levels of our society. It can be as simple as a “wrong number” text that starts the “game” and ends with you losing big. In fact, the threat has become so widespread that Senator Diane Warren (D-Mass.) recently introduced a bill, the Digital Asset Anti-Money Laundering Act, which aims to make it easier for government regulators to track suspicious activity around crypto and shut down scammers.
The Best Defense Against Crypto Scammers
Being aware of the types and scope of crypto attacks can be your best defense against falling victim to these scams. The more you know about it, the better you will be at spotting the clues and determining that “something’s not right.”
First, let’s start with some basics about crypto.
Crypto 101
Crypto is digital currency—it only exists online. There is no physical asset. There are multiple types of crypto, with the most well-known being Bitcoin and Ether.
Crypto can be purchased electronically (using your computer or phone) through an exchange, an app, a website, or a cryptocurrency “ATM.” There are also other ways to purchase crypto which involve solving complicated puzzles. Once purchased, crypto is stored in a digital wallet from which you can spend or invest your money.
The major drawback with crypto is that it is not regulated and there are no legal or government protections for those who put their money into it. So, if you fall prey to a password breach or other type of fraud, there is no recourse.
Types of Crypto Scams
There are many types of crypto scams, so awareness is key to avoiding them. Watch out for the following:
- Celebrity Enticement. Social media messages from celebrities promising to multiply any crypto you send to them are a typical scam. Think about it, would Brad Pitt or Oprah Winfrey really be looking to partner with you?
- Too-Good-To-Be-True Investment Opportunities. When an investment manager contacts you “out of the blue” with promises of big payouts if you invest in crypto, it is often a scam. Also watch out for those offering “free money” or guaranteeing unusually large returns on investment.
- Romance. The number one way scammers lure their victims is by promising romance. Scammers use dating websites to lure victims into believing they are in a romantic relationship. There have even been reported cases in which scammers send a “wrong number” text message to an individual, strike up a conversation, and develop a romantic relationship. Then, when trust is established, the scammer urges the victim to invest in crypto with them, with the victim transferring cryptocurrency or account information to the scammer. This story from the San Francisco Chronical shows you how easily the average guy can fall victim to scammers.
Once the scammer draws you in, false reports of huge gains keep you, the investor, “on the hook” and wanting to invest more money. Unfortunately, it is when you try to withdraw your money that the scam is revealed. Then it is too late.
The Bottom Line
No matter who you are or how much—or little—money you have, you need to be aware of the types of scams out there.
Watch the news or read about scams on the internet so you know what to look for.
Be vigilant—or even a little suspicious—at all times. Never click on unsolicited links in email or text; never give out account information (through email, text or phone) without verifying that the receiver is who you think they are (i.e., your bank, your credit card company, etc.), and even be wary of romantic partners looking to help you invest.
Finally, think! If it sounds too good to be true, it usually is.
