How Americans Are Losing Their Life Savings Due to Cryptocurrency Scams

Cryptocurrency, which has been hyped as the future of finance, has become a $2 trillion plus industry in the last 10 years. As a new form of digital money with the potential of being decentralized and creating wealth, Bitcoin, Ethereum, and many other forms of digital currency have pulled in millions of investors from across the globe. Yet, as the market’s popularity grew, so did the incidents of cryptocurrency scams that have become a nightmare for many Americans in terms of financial loss.

An Analysis of the Extent of Cryptocurrency Scams in America

Cryptocurrency-related scams are on the rise, and people in the United States have fallen prey to these cons to the tune of billions of dollars. A report! from the Federal Trade Commission (FTC) established that a total of $1 billion was lost to crypto-related scams in the first three months of 2021 alone with each individual losing an average of $2,600. This is in stark contrast to the previous year and shows how these scams are changing at a very fast rate.

The real numbers could be even greater as many of the sufferers are too embarrassed or too ashamed to come forth and make a report. Owing to the fact that cryptocurrencies are unregulated and can be used without identification, they represent a great opportunity for fraudsters who can work anonymously and across the borders, thus eluding the law.

Common Cryptocurrency Scams

Investment Scams

Fake Investment Platforms:

Fraudsters develop very realistic fake accounts that lure people into investing in cryptocurrencies with huge returns. The moment the victims invest their money, the platforms are gone, together with the victims’ cash.

Ponzi Schemes:

These frauds attract the investors with the hope of making huge profits in shorter time and pay the returns from the money collected from the new investors. After which the scheme fails which it is sure to, the schemers vanish and investors are left empty handed.

Phishing Scams

-Email and Website Fraud: The fraudsters use phishing emails or create fake websites that are similar to the real crypto exchanges or wallets. When the users give the scammers their credentials, the scammers are able to enter the users’ real accounts and withdraw their money.

Rug Pulls

-Deceptive Crypto Projects: In these schemes, developers pitch a new crypto asset or an emerging DeFi project and garner a lot of capital in the process. They gather enough money, then stop working on the project, and flee with the investors’ money. As per a report by Chainalysis, rug pulls contributed to 37% of all the cryptocurrency scam revenue in the year 2021 whereas it was only 1% in the year 2020.

Celebrity Endorsement Scams

Fake Endorsements

Fraudsters use fake endorsements from stars to give credence to the scams they are running to unsuspecting people. Some of the most highly publicised instances have involved the use of even celebrity names, such as Elon Musk, in a given scheme without permission.

The Psychological and Technological Tactics Used by Scammers

Scammers are very well aware of the fact that they can easily deceive technology as well as human mind. They tap into the FOMO and greed of people by telling them that they can get great gains with little work. They also employ highly technical social engineering tactics whereby a harasser will contact the victim on social media, dating sites, or even through texting in order to gain the victim’s trust before attempting to defraud them.

Currently, DeFi and NFTs have also been used by fraudsters to advance their fraud schemes. These new technologies are relatively novel, and the average consumer has no idea how they work, which is why fraud thrives.

Real-Life Impact

The impact on people of these scams is disastrous. Let us take the case of Chris, a 30 years old man from California who was conned into investing all his $500,000 life savings into a fake crypto investment platform. He got elated after watching an advert on social media platform and decided to invest his money without a second thought, thinking it was a good opportunity. But, in a few weeks’ time, the platform disappeared and Chris was left with nothing.

Another such victim was Linda, a 60-year-old woman who lost her $200000 retirement savings to a phishing scheme. Thus, she clicked on the link in what she believed was an email from her crypto wallet provider, and passed on her login details to the fraudsters, who, in minutes, cleaned out her account.

These are not mere one-off events, but rather on the rise as the fraudsters up their ante.

Regulatory and Legal Responses

As the threat has increased, U. S. Regulatory authorities such as the SEC and CFTC have started to regulate fraudulent crypto related schemes. The regulator has had to sue several times for fraudulent ICOs and other cryptocurrency-related frauds. Nonetheless, given the fact that volumes are huge and the market is highly fragmented, real enforcement is actually a daunting task.

However, there are several critics that think that there is need for more strict measures to be put in place in a bid to safeguard the investors. This includes: Enhanced guidelines for Cryptocurrency exchanges, Increased awareness among consumers, and Increased funding for the investigative agencies to track and apprehend the fraudsters.

How to Protect Yourself

Cryptocurrency scams are real and therefore, to avoid falling a victim, one has to be cautious and skeptical. Here are some steps you can take:

Do Your Research:

It is advisable to first check on any platform or project before putting your money into it. Check for reviews, check endorsements, and ensure that the platform is accredited or not.

Be Skeptical of High Returns:

If something looks to be too good to be true, it more than likely is. There are no investments that have very high returns with very low risks, so be careful of any guarantee.

Secure Your Accounts:

Discard and do not reuse passwords for your crypto wallets and turn on two-factor authentication. Although the links may seem as if they were sent by your friends, or by genuine commercial companies, it is advisable not to click on them.

Consult with Professionals:

It is recommended to seek advice from the financial advisors who are specialized in cryptocurrencies before making costly investments.

Conclusion

With the uptake of cryptocurrencies increasing, so does the frequency of being a victim of a scam. The market is also rather uncontrolled and geographically dispersed, which makes it attractive for fraudsters whose activities are becoming more and more elaborate. Therefore, ensuring that you are informed, conduct your research and be wary, you will be able to prevent yourself from being a victim of the next cryptocurrency scam. In the realm of crypto, the saying ‘knowledge is king’ couldn’t be truer, so do your homework.