Have you received an electronic message like this one recently?
"Can we be friends? Learn together to make money! I can get 3.5% of stable income every day by investing in cryptocurrency, which is very safe and without any risk If there is a loss, the company will pay."
When I got the message early last week I deleted it immediately.
Problem is, "too good to be true" messages are proliferating with the number of fraud and scams associated with crypto-assets on the rise.
This insight doesn't even take into account misappropriated customer assets and other shenanigans by crypto-evangelist Sam Bankman-Fried and his defunct crypto companies. Despite the gold-spinning hyperventilation of techno-utopians, crypto seems only good for gambling and fraud.
Crypto is a market tailor-made for scamsters. The crypto market is unregulated; transactions can't be reversed; and most people don't understand how digital currencies work.
A report from the Consumer Financial Protection Bureau from November analyzed consumer complaints submitted to it about crypto from October 2018 to September 2022.
The most common complaints involved fraud and scams, at 40% of the total. I find it worrisome that fraud and scam complaints rose to more than half of the total this year. I suspect the numbers will go even higher with the crypto market turmoil.
A Federal Trade Commission report from last June estimated that more than $1 billion had been lost to crypto scams from January 2021 to March 2022. The median individual loss was $$2,600. Ordinary people are being fleeced by crypto fraud.
There are many varieties of crypto scams. The top three: Romance fraud, scammers posing as influencers, and "pig butchering." In case you were wondering, pig butchering is the catchphrase for fraudsters posing as financial successes to gain victims' confidence and persuade them to set up crypto accounts.
None of the techniques elaborated in the government reports are exclusive to crypto. The larger lessons from how best to avoid crypto frauds apply to other scams.
Since criminals thrive during the holiday season, it's worth reviewing some of the best ways to protect yourself from crypto and other scams. Among them:
- Only scammers "guarantee" profits or lush returns. The guarantee is impossible.
- Nobody legit will require you to buy cryptocurrency. That's a scam.
- Online dating and investment advice don't mix. Period.
- Only invest in things you understand, including cryptocurrency.
- Take your time. Scam artists will pressure you to act quickly. Don't.
Farrell is economics contributor to the Star Tribune, Minnesota Public Radio and American Public Media's "Marketplace."