By Cinthya Lavin, BBB Serving Southeast Florida & the Caribbean

Cryptocurrency is the hot new trend in investing, and much is still not understood about this buzzy, volatile digital payment system that does not rely on banks to verify transactions. This has created a fertile environment for scams.

Cryptocurrency is a form of digital money whereby encryption technology can enable anyone anywhere to send and receive payments. It does not exist in a physical form such as paper money, but as lines of computer code, supported by a decentralized computer system known as blockchain and stored in a “crypto wallet.” Bitcoin, developed in 2009, is the most popular form of cryptocurrency, available for purchase at tens of thousands of Bitcoin ATMs and increasingly accepted as payment in certain retail transactions.

Reports from victims of large financial losses to cryptocurrency related scams are skyrocketing. In 2021, BBB received more than 2,400 complaints with monetary losses of nearly $8 million involving cryptocurrency companies. BBB Scam Tracker reports tripled between 2019 and 2021, and reported losses tripled over the last two years. 

Cryptocurrency accounted for the second highest scam losses reported to the Federal Trade Commission (FTC) in 2021, with losses of $750 million. The FBI’s Internet Crime Complaint Center (IC3) also had a major increase in reports received and major increase in losses. Cryptocurrency has some key traits that make it attractive to scammers: It is relatively unregulated and difficult to recoup once lost; it is wildly popular, and it is not well understood by the general public.

Many victims report that after purchasing cryptocurrency, they were directed to websites where they had to create an account in order to monitor their investments. But victims who want to withdraw their “earnings” are told they must contribute more money to cover taxes, commissions, or other fees. Ultimately, they can never withdraw money. 

BBB Scam Tracker data shows that cryptocurrency scams most commonly originate on social media, with the FTC noting that 25% of crypto fraud reported in 2021 began on social media. Scammers may impersonate a victim’s friends to tell them about their success in crypto investing, or they may make Facebook posts promising big gains. 

Cryptocurrency figures prominently in other scams as well. Law enforcement and BBB report that romance scammers have begun convincing their victims to invest in cryptocurrency via sophisticated fake apps, disappearing with the money when the victim attempts to withdraw proceeds.  Law enforcement agencies have pursued cases involving large cryptocurrency losses and the use of cryptocurrency in criminal activity.

Tips to avoid cryptocurrency scams: 

• Guard your wallet. If you buy cryptocurrency, the security of the wallet is of prime importance. If you lose the key, then your funds are gone permanently.  
• Look carefully at email addresses and website addresses. Phishing scams often try to trick people into logging in and then capture the login credentials.
• Do not pay for products with cryptocurrency. Be careful if someone asks you to pay with Bitcoin or another cryptocurrency.
• Beware of fake recovery companies. Scam companies sometimes claim that they can recover stolen money – for a fee. These are usually scammers.
• Be careful about claims made on social media. This is the most common place for people to encounter investment scams. 
• Be wary of “friends” who reach out to you on social media and tell you how they made money with cryptocurrency. Accounts are frequently compromised. Call your friend by phone to see if it is really them. 
• Only download apps from Google Play or the App Store. Trusted app stores do not eliminate the threat of app scams, but they do offer a basic level of protection.
• Do not believe promises of guaranteed returns. No one can guarantee how an investment will perform. 

Where to report a scam:

• Better Business Bureau — file a complaint with BBB at BBB.org if you lost money or report a scam online at BBB.org/scamtracker.  
• Federal Trade Commission (FTC) — file a complaint online at reportfraud.ftc.gov or call 877-FTC-Help.  
• Internet Crime Complaint Center (IC3) — file a complaint at ic3.gov/complaint

U.S. Securities and Exchange Commission — SEC.gov/tcr