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George Spencer

September 11, 2021

How Bitcoin Scams Work

People ages 20 to 49 are over five times more likely to report losing money on crypto scams since around October last year. Specifically people in their 20s and 30s have been hit the hardest. They have lost far more money on crypto investment scams than on any other type of fraud scheme.

More than half of all reported investment scam losses are in cryptocurrency. However, while people over the age of 50 are less likely to report losing money on crypto scams, their reported individual losses were higher, with a median of $3,250.

We all need to be more susceptible to crypto scams especially the people that are more likely to take risks and are more active and fluent with online banking platforms and apps like Venmo and Cash App. Millennials are also more likely to have an interest in or knowledge of cryptocurrency than their older counterparts. This might bring you to ask yourself how exactly do Bitcoin scams even work?

The FTC’s report reveals median losses from Bitcoin scams have totaled $1,900. But compared to the same period a year prior, there were 12 times the number of reports and a nearly 1,000 percent increase in reported losses.

Thanks to the anonymity of the internet, scammers are able to blend into the crypto scene with claims that can seem plausible. Cryptocurrencies are still not a completely known territory for many people, and this makes it harder for them to tell what’s real and what’s a scam

Scammers are increasingly impersonating government authorities and business. Some people have reported to the FTC that they deposited cash into Bitcoin ATMs to pay imposters claiming to be from the Social Security Administration. Others reported losing money to scammers posing as Coinbase, the largest U.S.-based cryptocurrency exchange and wallet provider.

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It’s worth pointing out, though, that only 14 percent of reported losses to imposters on the internet involved cryptocurrency. A much larger proportion, 86 percent, involved fiat currency. But this ratio is likely to change as the crypto industry is growing exponentially. If it continue, the percentage of losses involving virtual currencies is likely to increase in the coming years.

Another way scammers do it is by appearing friendly and willing to share their investment tips with you. This is often part of the ruse to get people to invest in their scheme. Some of these schemes are based on referral chains and work by bringing in people who then recruit new investors.

Scammers tell people to pay in crypto for the right to recruit others into a program in turn for rewards paid in cryptocurrency. The more you pay, the more money they promise you’ll make.

Other tactics involve using online dating to draw people in. Not long ago, the FTC received reports of investors who are tricked into believing they are in long-distance relationships. When a trust has been established, these lovers will promise huge returns on exciting, new cryptocurrency investment schemes, then ghost them after they have invested, leaving with the money.

Another way is through giveaways that are promoted on Twitter, Facebook, and other social media site that appear to be sponsored by celebrities promising to immediately multiply the cryptocurrencies people send. In most cases, duped investors are just sending coins directly to a scammer’s wallet. Impersonators of crypto enthusiast and self-described received over $2 million this year alone.

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Bottom-line is if you’re interested in getting involved with cryptocurrency, use common sense and be careful where you invest your money and who you invest it with. Be smart, do your research, and you’ll likely come out unscathed.