The United States Federal Bureau of Investigation (FBI) has revealed that the cost of investment scams between 2021 and 2022 has increased by 127%. Published in this year’s Internet Crime Report, the figures on investment and cryptocurrency investment scams show that US citizens alone have lost over $3.31 billion in 2022 to investment scams. Within that figure, $2.57 billion was lost solely to cryptocurrency investment scams, a 183% rise since 2021.
Cryptocurrency scams are cybercriminals’ new money-making strategy. The scams lure victims with offers of high return rates for low investment amounts, often done through social media, dating platforms, and online messaging sites. The FBI warns that “Criminals use fictitious identities to develop relationships and build rapport with victims” and that “Once trust is established with victims, criminals introduce the topic of cryptocurrency and claim to have the expertise, or an affiliation with experts, who can help potential investors achieve financial success”.
Scammers often use social media accounts to hide behind and build a relationship with the victim over time while requesting more and more money for their “investment”.
Although the FBI’s report focuses on losses involving US citizens, cryptocurrency scams’ damage is equally massive in the UK. As the BBC reports, some banks in the UK, such as NatWest, have started limiting the amount of money a customer can transfer to cryptocurrency exchanges. NatWest customers alone have lost over £329 million from the scams.
The money a scammer can take off a single person can be huge, and it is easy for someone to lose their life savings to these investment scams. Because of this, knowing how to protect yourself from falling victim to a cryptocurrency investment scam is essential.
How to protect yourself:
- Only scammers will guarantee fast profits and high return rates. The unregulated cryptocurrency market means that the value of a coin highly fluctuates, much more than any traditional currency. No legitimate cryptocurrency-related product will guarantee you will profit from the investment. It is probably a scam if it sounds too good to be true.
- It is easy to fake a brand or celebrity endorsement. Brand logos and celebrity photos can be found online and used on any site. Quotes can easily be made up, and scammers will use them to make their scams seem legitimate. If in doubt, search the brand or celebrity’s name alongside the cryptocurrency you invest in to see if the endorsement claims are legitimate.
- Celebrities, politicians, and so-called “investment managers” will never contact you out of the blue to discuss cryptocurrency. Especially on social media, telephone calls, text messages, and even dating apps! If anyone is contacting you out of nowhere about cryptocurrency, it’s a scam.
If you are considering investing in cryptocurrency, here are a few ways to ensure you are investing in a legitimate service and to keep your money protected:
- Do your research on different crypto coins and wallets. The cryptocurrency world differs significantly from typical currency; crypto coins work differently from regular pounds or dollars. Knowing how the technology behind cryptocurrency works can help inform you on what to invest in. If it is unclear how a particular cryptocurrency works, it is best to pause any investment and do more research – you may discover that the currency is fraudulent.
- Only invest small amounts into new wallets. The first time you buy a new cryptocurrency, sending a small amount of money can help you determine the legitimacy of the currency or wallet.
- Protect your crypto wallet. Investing in cryptocurrency involves using a digital wallet with privet keys. If a potential investment opportunity asks you to share your private keys, or any other passwords relating to your crypto wallet, then it is highly likely the opportunity is a scam. Never share your wallet’s private keys, or any other passwords relating to your crypto wallet, with anyone.
- Don’t rush! Talk the investment through with family, friends, or financial advisors. Investing in new technology can be exciting, and investing large amounts at once is often tempting. However, scammers exploit this and push new investors to keep giving more money to the scammer’s cryptocurrency scheme. If you are considering investing, take the time to talk to others about what you are interested in putting money towards.
- Legitimate cryptocurrencies have a well-written whitepaper. All legitimate cryptocurrencies have a whitepaper – a document detailing the technical, financial, and commercial information about the currency. These can be found through a simple Google search or the Whitepaper Database. If you cannot find the whitepaper for a currency, or it does not seem as well written and detailed as other legitimate currencies, it may be a scam and should not be invested in.
- Check that the investment site or firm you are investing with is legitimate. This can be done by seeing if the business is on the Financial Conduct Authority’s (FCA) Financial Services register. In the UK, nearly all financial services must be authorised by the FCA. The FCA also regularly updates a list of unauthorised firms, including those involved in fraudulent activities. On top of that, the FCA provides a Scam Smart service, which can help you quickly identify if the cryptocurrency you are investing in is legitimate.
- Never invest more than you are willing to lose. Cryptocurrency isn’t regulated, meaning it can decrease in value as quickly as it can increase. Financial firms can’t help you if your investment fails to profit or if a currency you have invested in stops trading, is hacked, or is fraudulent.