Cryptocurrency was heralded as a revolutionary advancement in how we manage our finances. Enthusiasts and so-called experts promised that this digital currency would empower individuals, offering unparalleled control over personal wealth while ensuring security in financial transactions.

However, the rise of cryptocurrency has also given way to an alarming number of scams, revealing that its security is not as robust as claimed. In fact, cybercriminals have exploited the vulnerabilities in this system, making it alarmingly straightforward to commit theft. The FBI reported a staggering $5.6 billion loss incurred by Americans due to crypto scams in 2023, marking a 45% increase from the previous year.

Over 69,000 individuals lodged complaints with the FBI’s Internet Crime Complaint Center (IC3) last year, with a significant percentage of these victims being aged 60 and above. This demographic is particularly susceptible, often lacking the technological savvy needed to navigate the complexities of cryptocurrency safely.

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The Most Common Crypto Scams

The FBI’s IC3 report has highlighted a multitude of scams revolving around cryptocurrency, with many utilizing convincing social engineering tactics as their modus operandi.

Investment Fraud

Investment fraud remains one of the most prevalent scams. Scammers typically reach out through calls, texts, or emails, luring victims with promises of extraordinary profits if they invest in a specific cryptocurrency. They often amplify the urgency, suggesting that everyone else is cashing in and that failing to act quickly means missing out on substantial returns. This tactic is particularly effective on those who have capital but lack technological familiarity, making them easy targets for such fraudulent schemes. Losses from these investment fraud schemes reported to the IC3 surged from $2.57 billion in 2022 to $3.96 billion in 2023, an alarming increase of 53%.

Relationship-Building Scams

Another tactic that scammers employ involves cultivating a relationship to lend credibility to their schemes. Using dating apps, social networks, professional networking sites, or even encrypted messaging services, these fraudsters attempt to establish trust. Once trust is built, they typically introduce the idea of investing in cryptocurrency. They may claim to be experts or assert that they have insider knowledge from a relevant field, pushing individuals to use phony websites or apps that they control for investing.

To add insult to injury, scammers often pretend to be “crypto-recovery specialists,” offering to help victims recover funds lost during the initial scam. Unfortunately, these so-called specialists usually vanish with the additional funds instead of assisting the victim. As the FBI aptly points out, these scammers will almost never agree to meet in real life.

How to Avoid Becoming a Victim of These Scams

Scammers Targeting the Elderly

There’s a distressing trend where crypto scammers are predominantly targeting individuals over the age of 60, particularly those who are not well-versed in technology. The FBI noted that this age group contributed to most of the complaints received in 2023 — approximately 16,806 complaints in total. Collectively, victims from this demographic suffered losses exceeding $1.6 billion. However, the staggering losses extend across all age groups, further underscoring the urgency of consumer education and vigilance. Below is a detailed breakdown of complaints and losses reported in 2023 by age group:

• Under 20: 858 complaints, $14.7 million in losses
• 20-29: 6,258 complaints, $168.6 million in losses
• 30-39: 10,849 complaints, $693.7 million in losses
• 40-49: 10,318 complaints, $843.9 million in losses
• 50-59: 8,918 complaints, $901.1 million in losses
• Over 60: 16,806 complaints, $1.65 billion in losses

“While individuals aged 30-39 and 40-49 reported the highest volume of cryptocurrency-investment fraud complaints — around 5,200 in each age group — those over 60 faced the steepest losses, estimated at over $1.24 billion,” as highlighted in the FBI report.

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Essential Considerations Before Diving into Cryptocurrency

Considering the evolving landscape of cryptocurrency and associated scams, I reached out to Paige Schaffer, CEO of Iris Powered by Generali, who provides a specialized identity and cyber protection platform, to gain valuable insights into the landscape of crypto investments.

1. What should someone do if they suspect they’ve become a victim of a cryptocurrency scam?

“If you believe you have fallen victim to a cryptocurrency scam, it is crucial to act swiftly to mitigate additional losses. Start by halting all interactions with the suspected scammer, which means immediately stopping any ongoing transactions, investments, withdrawals, or deposits to limit the loss. It is also vital to change your passwords and activate two-factor authentication on all relevant accounts, including your email and any financial platforms linked to your investments.”

Additionally, employing a password manager can enhance your security. This tool will help you generate robust and complex passwords, decreasing your vulnerability to hacking attempts. Moreover, it keeps all your passwords in one location and even auto-fills them when you access your accounts. It significantly alleviates the need to memorize multiple passwords, ensuring you do not resort to reusing them across different platforms. For more insights, check out my best expert-reviewed password managers of 2024 here.

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2. How can individuals verify the authenticity of a cryptocurrency exchange or platform before making an investment?

“Before committing to any crypto investment, conduct an online search using the name of the company or individual, alongside the cryptocurrency, including terms such as ‘review,’ ‘scam,’ or ‘complaint.’ Investigating what others have experienced can be enlightening. Further, look for news articles mentioning the exchange; positive reports about partnerships or advancements can signal trustworthiness, while evidence of security breaches or legal disputes should raise immediate concerns.”

It’s wise to gravitate toward well-known exchanges with a reputation for security and transparency, such as Binance, Coinbase, and Kraken, as opposed to lesser-known platforms that may harbor fraudulent intentions or lax security measures.

3. Are there specific security precautions individuals should take to protect their digital wallets and crypto assets?

“Employ strong, unique passwords and always utilize two-factor authentication for your digital wallets and crypto assets. Additionally, consider using hardware wallets to store larger crypto holdings; as these are not connected to the internet, they provide far greater protection against hacking attempts. Regularly updating wallet software to patch any vulnerabilities is equally critical.”

4. What recommendations would you make to someone keen on investing in cryptocurrency but concerned about scams?

“It is prudent to approach the world of cryptocurrency with caution, so your concerns are valid. Start with thorough research into various cryptocurrencies, understanding their market dynamics, technological underpinnings, and the activities of their respective communities and developers. Always leverage reputable exchanges and wallets that comply with regulatory requirements while promoting robust security practices.”

BE AWARE OF HOW SCAMMERS USE YOUR PERSONAL INFORMATION FOR FINANCIAL SCAMS AND HOW YOU CAN STOP THEM

Five Additional Strategies for Safeguarding Yourself from Crypto Scams

1. Treat “too good to be true” offers with skepticism: One of the biggest indicators of potential crypto scams is the promise of guaranteed returns with little to no risk. Scammers are adept at luring individuals with claims of rapidly doubling or tripling investments. Exercise caution with these propositions, as genuine investments do not assure profits.

2. Protect your personal information: Your personal details are a gateway to accessing your crypto funds. Always be cautious and avoid sharing sensitive information such as private keys, passwords, or wallet specifics. Never disclose this data to anyone, regardless of their claims regarding legitimacy or authority. Be particularly vigilant against phishing emails or imposters masquerading as customer service agents; reputable organizations will never request this type of data.

3. Install reliable antivirus software on all devices: Investing in strong antivirus software is one of the best defenses against malicious links that could install malware on your devices, potentially compromising your private information. This software can also alert you to phishing attempts and ransomware, safeguarding both your personal details and digital assets. See my recommendations for the best antivirus protection of 2024 for various platforms.

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4. Be cautious of unsolicited communications: Scammers often reach out to potential victims through social media, dating applications, professional networking platforms, or via email, posing as friends, financial advisors, or crypto specialists. If an unknown individual presents an investment opportunity, claims to possess insider information, or pushes for immediate action, that’s a signal you should proceed with caution.

5. Remove your personal information from the internet: Minimizing your digital footprint can be vital in preventing scammers from making contact. Consider using data removal services to eliminate your personal information from databases and websites that expose it to criminal actors. By taking these protective measures, you significantly reduce the risk of becoming a victim of scams predicated on your personal data. Check out my top recommendations for data removal services here.

STAY VIGILANT AGAINST ENCRYPTED PDFS — THE LATEST FRONT IN THE SCAM WAR

Kurt’s Key Takeaway

While the allure of cryptocurrency may seem irresistible as a viable path to wealth, it is fraught with risks and complexities. I would advise caution unless you possess a solid understanding of the technology involved. My skepticism is not directed at cryptocurrency itself, which indeed holds the potential to fulfill its promises, but rather at how it eliminates intermediaries like banks, thereby establishing opportunities for fraud, theft, and money laundering.

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