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Bitcoin scams are like a box of chocolates. You never know what kind you’re going to get.
While the brashest crypto scams end up in the headlines, like the case of a Las Vegas poker player who pilfered $500,000 from another card shark, most shakedowns are more prosaic. Think of schemes that use threatening phone calls, a desperate plea for money or a demand to transfer sums of cash or else.
Whatever form it takes, there’s no denying that cryptocurrency fraud is on the rise. The Federal Trade Commission (FTC) received 7,000 reports of crypto theft, with a combined value of more than $80 million, between October 2020 and March 2021. That’s a 12-fold increase in cases and a 1,000% jump in cash amount compared to the same period a year prior.
When it comes to Bitcoin fraud, the strengths of cryptocurrency are turned against the victims.
“Bitcoin-related scams track with other criminal exploits online until you try to recover your assets,” said cybersecurity expert Adam Levin. “Cryptocurrency is designed to be hard to track and even more difficult to recapture. Once transferred, it’s gone, with a few very high-level exceptions.”
While the number of Bitcoin transactions has remained static in recent years, the value of cryptocurrency has surged. One Bitcoin was worth $9,000 in April 2020 compared to roughly $43,000 now.
Here are the Bitcoin scams that you should be on the lookout to avoid.
Bitcoin Fraud and Imposters
In the poker scam mentioned above, the perp allegedly posed as the victim’s business partner on the encrypted text app, Telegram. The faux partner wanted to exchange $500,000 worth of Bitcoin, plus a $50,000 fee, for cash. The victim sent the Bitcoin, but never got the cash. When he reached out to his real associate by other means, the associate had no clue what was going on.
The numbers involved in Bitcoin imposter schemes aren’t always this large. For instance, one scammer who posed as a Coinbase reporter contacted public relations companies offering positive coverage for clients in exchange for a measly sum of $600.
And then there are twists on old-fashioned Social Security scams. For instance, a Naples, Fla. resident was told by a perp that her Social Security number had been stolen and was being used to open fraudulent bank accounts. She was instructed to download an app, then transfer all of her money from her bank account into Bitcoin. Thankfully, a fraud alert popped up on her phone before the deed was done.
“Always take a moment before clicking on links sent via email or SMS, and don’t install apps on your mobile device unless you’re 100% certain they are legit by checking the reviews on the platform where you found them,” said Levin.
The FTC warns of another Social Security scam where folks are told to deposit cash in Bitcoin ATM machines to pay scammers who are claiming to be from the Social Security Administration.
Fake Bitcoin Investing Scams
Bitcoin is an abstraction of an abstraction. It’s a store of value that not only doesn’t take any physical form, but also lacks any backing by the full faith and credit of a sovereign government.
Enthusiasts find these aspects of cryptocurrency deeply appealing. Many Bitcoin investors believe the less government involvement in money, the better. Others prefer to engage in financial transactions that are hard to trace by the authorities.
Unfortunately, these are also big advantages for scammers who set up fake websites purporting to offer new investors the chance to make a quick buck. This is what happened to one victim of a 2017 scheme from Australia.
The man, whom ABC Everyday identified as Jonathan, saw an Instagram post that advertised the chance to make a 50% return mining for Bitcoin. He initially sent the site $50, and soon thereafter got $30 back in profit.
Moreover, the Instagram account was full of testimonial videos and other folks endorsing the service, and had thousands of followers. It looked legitimate.
He then prostelyzed his newfound opportunity to friends and family. All in all, Jonathan, his family and friends chipped in about $20,000. Then the account disappeared, and the thief with it. Not only did he lose his money, but some of his friends no longer speak to him.
The entire cost of these types of Ponzi-style Bitcoin scams can be enormous.
“Many people have reported being lured to websites that look like opportunities for investing in or mining cryptocurrencies, but are bogus,” per the FTC. “Sites use fake testimonials and cryptocurrency jargon to appear credible, but promises of enormous, guaranteed returns are simply lies.”
Bitcoin Giveaway Fraud
In July 2020, something truly remarkable happened. Celebrities and famous figures around the world all went to their Twitter accounts simultaneously to promote the same Bitcoin giveaway offer. Shockingly, it seemed too good to be true.
“I am giving back to my community due to Covid-19!” wrote former President Barack Obama on his Twitter account. “All Bitcoin sent to my address below will be sent back doubled. If you send $1,000, I will send back $2,000!”
The accounts for Joe Biden, rapper Kanye West and former New York City mayor Mike Bloomberg, among others, published the same message.
As you probably guessed, the giveaway offers were all part of an unprecedented Twitter hack. Jack Dorsey, the former chief executive officer of Twitter, called it “a tough day” for the social media company.
These types of scams, though, are nothing new. The FTC estimates that over a six-month period in late 2020 and early 2021, people reportedly sent more than $2 million in cryptocurrency to investment frauds pretending to be fronted by Tesla Inc. founder and crypto enthusiast Elon Musk.
Crypto Romance Scams
Bitcoin’s meteoric rise has dovetailed with the mass adoption of dating apps that make it really easy to find new romantic partners. While that may be a boon for people who are looking for love, it’s also a goldmine for scammers.
In fact, cryptocurrency was the top payment choice for romance scams reported to the FTC in 2021 ($139 million), followed by bank transfers ($121 million), wire transfers ($93 million) and gift cards ($36 million).
While romance scams are nothing new, cryptocurrency adds a new twist: Unsuspecting paramours believe they’re getting in on a crypto investing opportunity.
Take Mike (not his real name), who was recently profiled by NBC News. Mike met a woman named Jenny on Tinder. They struck up a relationship, texting on Tinder and WhatsApp.
After about a month, Jenny told Mike that she had a good tip. She claimed that her uncle worked at JPMorgan Chase, and “…was the world expert in Bitcoin options.” Mike was in the market for love, not Bitcoin, but he soon grew interested and invested $3,000 on Crypto.com, a legitimate cryptocurrency exchange.
Eventually the con grew deeper. Jenny persuaded him to move his money to a different exchange and to keep investing. His portfolio soon hit $1 million in value.
Mike grew suspicious when Jenny told him to send his tax payments to the Department of Homeland Security instead of the Internal Revenue Service (IRS). Then he found he couldn’t withdraw his money from the new crypto exchange account, at which point he realized it was all a long con. Mike ultimately lost nearly $280,000.
How to Recognize Bitcoin Scams
It’s easy to look at these individual cases and marvel at how foolish the victims seem to be.
Why was Mike listening to a woman he’d never actually met and agreeing to invest hundreds of thousands of dollars? How could anyone give away $500,000 worth of Bitcoin to a business partner without at least picking up the phone to discuss the deal? How could someone believe that they could get a guaranteed 50% return?
The problem is that it’s easy to lose your skeptical faculties when you feel like you’ve met your future spouse, you’re chatting with who you think is a close partner or you believe you’ve found a sure thing. It’s easy to lose sight of red flags when these confounding factors cloud your judgment.
That’s why it’s important to keep a few rules of thumb in mind whenever someone you’ve never actually met comes to you with a chance to make money in Bitcoin.
- Don’t believe the hype. Any claim of a guaranteed return, especially a very sizable guaranteed return, should always be treated as a scam. There are practically no legitimate investments that can double your money in a week or a month, or even a year, as Bernie Madoff’s victims can attest. Likewise, ignore any claim that your Bitcoin investment can be “multiplied.”
- Bitcoin for Bitcoin’s sake. The reason why Bitcoin has risen so dramatically in value recently is because genuine investors believe they can sell it to someone else for a higher price at a future date. That’s what makes crypto a highly speculative investment. Always ignore “investment opportunities” that claim to be helping you get in on special or rare deals that involve Bitcoin.
- Obsessed with Bitcoin. Let’s say you meet someone online, and they really want you to invest in Bitcoin. They’re almost certainly lying to you. Meanwhile, the government–especially the Social Security Administration–doesn’t track you down and demand instant crypto payments. If you’re dealing with someone who is demanding that you adopt Bitcoin in some fashion, disengage and call the cops.
If you suspect that you’ve been the target of a crypto scam, file a report with the FTC. When you share information about Bitcoin scams, it can help the FTC investigate fraud methods and keep Americans aware of new scams.
