If you’ve been online in the past few years, you’ve probably heard a lot of people talking about Bitcoin and other forms of cryptocurrency. Maybe you’ve even been savvy enough to try your hand in this new form of digital currency.
Like with any new technological advancement, many investors have found great luck in turning over sizable profits from their Bitcoin investments. But where there’s potential to make money, there’s potential to lose it. And because of Bitcoin’s untraceable nature and a lack of a third party between money exchanges, the cryptocurrency world has become a mecca for scammers.
That’s why it’s so important to guard yourself and your finances against Bitcoin and crypto scams. The more knowledge you’re armed with, the more prepared you’ll be for when you encounter a Bitcoin scammer in real life.
So, what are crypto scams? And how should you avoid them? Read on to find out.
What Are Crypto Scams?
For those who don’t know, Bitcoin is a type of digital currency (aka cryptocurrency) that has boomed in recent years and has allowed many investors to flip their money and profit thousands of dollars.
Bitcoin and cryptocurrency are unusual because you can exchange cryptocurrency electronically without a third party like a bank or credit card. People gain cryptocurrency by either purchasing it or by “mining” it by solving complicated online math problems. Once purchased or earned, you store your cryptocurrency in an online digital wallet.
With everything online, it’s easier than ever for a scammer to hack your money. Crypto scams typically work by either having you pay cryptocurrency directly to a scammer under pretenses (like having you invest in a fake business but only pay in Bitcoin) or by hacking into your wallet to drain your account.
If this sounds far-fetched, it isn’t. In recent years, bitcoin and cryptocurrency scams have become more and more common. In fact, in 2017 scammers stole five million in Bitcoin from victims. And in the first quarter of 2020, victims reported a total of $24 million of stolen funds.
Here are the top three cryptocurrency scams to look out for.
Types of Crypto Scams
Fake Cryptocurrencies: With so many types of cryptocurrency emerging in the digital age, scammers will create a fake cryptocurrency and get victims to invest in them. Once victims purchase this “currency,” their money is rerouted into the scammers’ account.
Fake Bitcoin Exchanges: Sometimes scammers will create entire fake Bitcoin exchanges to scam you out of your money. Always use bitcoin exchange platforms that are well-known and have proven track records.
Malware: Hackers can access your digital wallet or account by installing malware onto your computer without you even knowing about it. The best way hackers do this is by advertising a program that earns you free bitcoins. Once you download the program and install it, the program then attaches to your bitcoin wallet and drains your funds.
As cliche as it may sound, if it sounds too good to be true then it probably is. Do as much research as possible when investing in or purchasing Bitcoin. If you get a bad feeling about a purchase, program, or investment opportunity, then there’s a good chance that something may be off.
What To Do If You’ve Been Scammed
If you believe you have been scammed, you should report the fraud to agencies including the Federal Trade Commission, the Commodity Futures Trading Commission, the U.S. Securities Exchange Commission, and the cryptocurrency exchange company that you used to send the money.
In some cases, you should even report the case to the FBI. For example, sometimes scammers will email you embarrassing pictures in an attempt to blackmail you. In cases like these, don’t give in to the blackmail but instead report it to the FBI.
Can You Get Your Money Back?
Since there isn’t a third-party bank involved, it’s difficult to reverse a transaction once that transaction has been finalized. For you to get your money back, the receiver of the money would have to willingly send the money back to you.
Unlike when you purchase an item with a credit card, cryptocurrency purchases do not come with any legal protections. Basically, you’re on your own when it comes to Bitcoin purchases. That’s why it’s so important to do your research before making purchases with your Bitcoin.
You need to protect yourself when you bring personal finances into the online market. Thousands of scammers out there are trying to figure out the best way to scam you out of your money.
It’s important to stay vigilant, listen to your gut, and always do your research. If something seems off, reach out to other investors in the cryptocurrency community to get their advice and share tips on how to keep each other safe and financially protected.