The FTC And State AGs Warn Consumers About Crypto Scams – Technology | #bumble | #tinder | #pof | #onlinedating | romancescams | #scams

If you use the internet, you have probably encountered at least
one of the scams con artists use to bilk victims. There’s
“catfishing” and other online dating fraud, where
scammers use fake identities to woo victims into sending money.
There’s also “grandparent scams,” where typically
elderly victims are tricked by those posing as his or her
grandchild into sending money for a faux emergency.
Cryptocurrency’s recent rise in popularity has seen fraudsters
put a twist on the old scams and come up with a new one:
cryptocurrency investment schemes. And the Federal Trade Commission
and state AGs are taking steps to put the public on notice and
minimize consumer harm on this new twist.

Crypto Scams

The North Dakota attorney general’s office indicated that
state citizens have fallen for traditional scams, including romance
and grandparent scams, but victims are asked to pay in
cryptocurrency, such as bitcoin, instead with fiat currency.1 Three
Michigan regulators – the attorney general, Department of Licensing
and Regulatory Affairs, and Department of Insurance and Financial
Services – have jointly sounded the alarm urging consumers to
protect themselves when using (or investing in) cryptocurrency.2

Beyond the traditional schemes that prey on the most vulnerable,
the cryptocurrency investment schemes have targeted unsuspecting
individuals and sophisticated investors alike. Some fraudsters make
“initial coin offerings” (ICOs) that function much like a
corporation’s initial public offering. Instead of stock,
however, scammers offer the public digital tokens, claiming they
will use the funds to build the latest and greatest cryptocurrency.
Unfortunately for victims, however, offerors sometimes take
investor money only to disappear without a trace.

These crypto investment scams have been aided by conditions ripe
for fraud: cryptocurrencies’ impressive increase in value3, a
lack of regulation, and one of crypto’s defining features -

The Harms Caused

Scammers have perpetrated cryptocurrency fraud at an impressive
scale. According to the Federal Trade Commission’s latest
report,4 victims lost more than $80 million
from October 2020 to March 2021 alone. While traditional internet
scams have targeted the elderly or lonely bachelors and
bachelorettes, the victims of cryptocurrency investment schemes
have primarily been men and women in their 20s and 30s. One
hypothesis for the disparity is older groups’ inherent mistrust
of digital currency, while younger age groups, who grew up
alongside technology’s repaid advances, are more likely to view
cryptocurrencies as a prudent investment.

Our Take

State and federal consumer protection agencies are focused on
the risks created by cryptocurrencies. For companies involved in
this space, we recommend taking proactive steps to reduce the risk
of a government-led investigation – given that, even here, an ounce
of prevention is worth a pound of cure.


1. See https://www.kxnet.com/news/cryptocurrency-scams-a-new-twist-on-an-old-attempt-to-steal-your-money/.

2. See https://www.michigan.gov/ag/0,4534,7-359-92297_47203-562264-m_2017_1,00.html.

3. From
October 2020 to March 2021, the price of bitcoin surged 450% to
nearly $59,000, while dogecoin surged 933% in the same

4. This
spotlight is based on reports from consumers to the FTC or to any
Consumer Sentinel Network data contributor.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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