Scam and investment fraud with cryptocurrencies are booming. Although the cryptocurrency market has stalled in the first half of 2022, there has been a significant increase in criminal activity. A total of $2.98 billion in digital assets have been stolen as of October 31, 2022, according to blockchain security firm PeckShield. That is almost a doubling of the amount of damage within a year. In 2021, the recorded total of stolen cryptos was US$ 1.55 billion. But is it possible to get your crypto money back once you got a victim of crypto scams?
Different Types Of Crypto Scams
There are different types of crypto scams and scenarios that scammers successfully use to scam bitcoins and other cryptocurrencies, for example:
- Investment scams
- Romance scam
- Rug pull scams
- Phishing scams
- Social Media Giveaway Scam
- Ponzi scheme
- Fake cryptocurrency exchanges
Investment scam is the generic term for any form of investment fraud in which cryptocurrencies are used as a means of payment. The range of possible cases of fraud ranges from shopping in scam shops to real estate investments.
Romance Scam or Love Scam is based on fake profiles on dating sites and social media. After establishing contacts with supposed partners, financial support is surreptitiously obtained. In principle, this form of fraud is a modern modification of a relationship or marriage fraud.
The Rug Pull Scam is a seemingly real project that is raising venture capital in the form of a cryptocurrency. This “project” is then terminated unexpectedly, without any notice and without proper handling. The project makers take the funds from the investors and silently disappear.
Phishing scams usually work with e-mails, prepared links and e-mail attachments, which criminals can then use to obtain access data or account information. Once the victim has clicked on the link, it would be referred to fake bank or stock exchange sites. There, the criminals steal access data from login attempts of the victims or try to motivate them to transfer crypto for profit or trading purposes.
Social media giveaway scams or fake sweepstakes work with fake accounts of celebrities, brands or support addresses of different companies. Using the fake account, cryptocurrency scammers contact participants in fake sweepstakes and congratulate the “winners” in order to gather information. The aim is to get bank and wallet information, credit card details and other personal data.
A Ponzi scheme is a type of investment scam that promises high returns with minimal risk. Ponzi schemes typically work by allowing early investors’ profits to come from later investors’ investments. Other names for this type of investment fraud are pyramid schemes. The system always topples when it is no longer possible to win enough new investors to service the “returns” of existing investors.
With fake cryptocurrency exchanges scammers entice investors with the promise of a great crypto exchange – maybe even extra bitcoins. To skim off a huge amount of money within a brief time span, crypto scammers encourage victims to pay a high starting fee. After they had success, they keep going to push by asking the “customers” to invest more by promising exorbitant profits. But in reality there is no exchange and the investors don’t know whether it is a fake until they have lost their deposit.
Crimes Related To Cryptocurrencies
The increasing cyber crime has led to the development of new structures and services on the part of the authorities and IT security companies. Crypto crime or business fraud involving cryptocurrencies refers to a new, specialized area of law and consulting that deals with crimes involving cryptocurrencies.
The special requirements for this form of IT forensics, for example, are conveyed in further training courses such as the CipherTrace Cryptocurrency Training and Certification Services. Such companies offer internationally recognized specializations with certification. With regard to crypto crime and blockchain forensics, the Cryptocurrency Essentials Certification (BCEC), Cryptocurrency Tracing Certified Examiner (CTCE) and the Certified Cryptocurrency Risk Specialist (CCRS) are certifications worth mentioning.
Social Media Is Popular With Cyber Criminals
The most common form of cryptocurrency scams comes from the field of social engineering. Alleged victims are written to via Twitter, Telegram, Facebook or LinkedIn. In personal contact, the scammers then convince the victims to invest in Bitcoins, in an ICO or other cryptocurrency. Most of the time, trust is first built up via social media before the phone number is exchanged and communicated via WhatsApp. Criminals are often quick to get to the point and immediately push for bitcoins to be transferred to scammers’ accounts.
After that profits are faked in the dashboard, which are not real. The bitcoins never ended up in any investment area, but were mostly transferred directly to the scammers’ wallets. If you want to withdraw your money, it will be refused. The feigned reason of the scammers is usually that they say taxes or fees have to be paid first. Blocking periods are also sometimes specified to prevent investors from making withdrawals for months. Cautious investors who invest small amounts as a test are often even paid out an alleged profit in order to encourage larger follow-up payments.
The experience shows that the crypto scammers are currently often located in Eastern Europe.
Professional Help Returns Money And Cryptocurrency
There are private companies specialized on investigation of crypto scams and blockchain forensics and luckily, they have chances to get lost cryptocurrency back. For the money flows can be tracked internationally via the blockchain. This makes it possible to freeze the funds as soon as they land on a central exchange such as Binance. It doesn’t matter which country the scammers come from.
Many investigators conduct free pre-checks prior to a consultation. In doing so, it is checked whether there is a chance of repatriation or freezing payments. However, the “recovery” process can be lengthy and depends on the cooperation and support of state investigative authorities such as public prosecutors and police here and abroad.
In order for investigators to take action, the amount of damage should have a certain volume. For example, some companies accept mandates from an amount of 15,000 USD/Euro. But even with smaller amounts, injured parties often receive support. In these cases, customers usually get help with tracing transactions and claims advice.
How To Report Crypto Scams To Authorities
As the most cryptocurrency scams are coming from the Eastern Europe, for inland authorities, it’s difficult to do much beyond the national borders. But nevertheless, even if you have assigned a private company to get your cryptocurrency back, you also should report the crypto scam to official bodies. For every report of a cryptocurrency scam would be entered in the statistics. When the authorities see that there is an increase in such crypto scams they will start to monitor it and eventually take actions on this, for example in collaboration with the Interpol or other cross-border authorities.
For example, in the US, you can report cryptocurrency scams to these authorities:
- Internet Crime Complaint Center (IC3)
- Securities and Exchange Commission (SEC)
- Federal Trade Commission
- Commodity Futures Trading Commission (CFTC)
In Europe, you can report a crypto scam directly to the corresponding authority. On the website of Europol, you will find links for each country from the European Union.
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