A day barely goes by before you hear someone has lost his entire investment online, thanks to crypto scammers.
Scams related to cryptocurrencies and digital assets are on a sharp rise as more and more people look to make money from these lucrative platforms.
Scammers took home a record $14 billion in cryptocurrency in 2021, thanks in large part to the rise of decentralized finance (DeFi) platforms, according to new data from blockchain analytics firm Chainalysis.
Losses from crypto-related crime also rose 79% from a year earlier, driven by a spike in theft and scams.
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“Stories of ‘crypto millionaires’ attracted some investors to try their hand at investing in cryptocurrencies or crypto-related investments this year, and with them, many stories of those who bet big and lost big began appearing, and they will continue to appear in 2022,” says Enforcement Section Committee Co-Chair Joseph P. Borg, Alabama Securities Commission Director.
In Kenya, hundreds are crying foul after losing their hard-earned cash to these scammers all in the name of making a quick shilling.
DeFi is a rapidly growing sector of the crypto market that aims to cut out middlemen, such as banks, from traditional financial transactions, like securing a loan, by using blockchain technology.
Many of the fraud threats facing investors today involve private offerings, which are exempted from federal law registration requirements. States are also preempted from enforcing investor protection laws related to these private securities.
“Unregistered private offerings generally are high-risk investments and don’t have the same investor protection requirements as those sold through public markets,” said an expert.
Ultimately, state securities regulators say that if it sounds too good to be true, it probably is.
Fraud experts say the trajectory is alarming, and will likely only get worse.
“When criminals latch onto a new way of stealing people’s money, others follow,” Kathy Stokes, director of fraud prevention at AARP, which has its own crypto scam-related resources, said.
“Combine this with the ‘legitimizing’ forces of pro-crypto ads and the move of 401(k) plan service providers to add this unregulated, highly speculative investment as an option for their plan participants, there’s no telling how many people will lose a lot of money — which they won’t likely get back.”
Younger people (aged 20 to 49) were three times more likely to be scammed this way than other age groups, but the average amount of money lost to scams increased with age.
This is generally true of non-crypto scams, too: While the stereotype is that only older people fall for online scams, young people are actually more likely to be victims.
Here are some things to know to play it safe(er) when it comes to cryptocurrency:
- Promises of guaranteed huge returns or claims that your cryptocurrency will be multiplied are always scams.
- The cryptocurrency itself is the investment. You make money if you’re lucky enough to sell it for more than you paid. Period. Don’t trust people who say they know a better way.
- If a caller, love interest, organization, or anyone else insists on cryptocurrency, you can bet it’s a scam.
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