Greg's Corner

Cryptocurrency scams are riskier than ever

By Greg Collier

Even though it’s risen in popularity within the past few years, cryptocurrency has actually been around for over a decade. The first and most well-known cryptocurrency is Bitcoin, which was first made public in 2009. Others such as Ethereum have also risen to prominence in that time. These are virtual currencies which have no centralized regulatory body. Cryptocurrencies are started with a built-in scarcity in mind, meaning there can only ever be a limited number of ‘coins’. The way these coins are mined is by computers solving complex mathematical equations. While someone can technically mine for cryptocurrency on their laptop, professional miners use large banks of computers with above-average processing power.

While the idea of cryptocurrency may seem sound on paper, due to its virtual nature, it’s susceptible to all sorts of scams. It seems like on an almost weekly basis, there are tabloid-like headlines recounting hacks, heists, and schemes that have cost crypto investors millions. But we’re here to discuss the average consumer who have also been affected by cryptocurrency scams.

The Better Business Bureau recently issued a report that said cryptocurrency scams were the 2nd riskiest scam for Americans in 2021. In 2020, cryptocurrency scams were only the 7th riskiest according to the BBB. The average consumer/investor typically does not have the time or the computing power to start mining. Instead, they’ll try to purchase cryptocurrency from someone else. These are usually done on marketplaces called exchanges. There are many legitimate exchanges, but there are also a number of fraudulent ones.

The most common cryptocurrency investment scam involves these fraudulent exchanges. An investor will be promised a guaranteed return on their investment. Except, when the investor tries to cash out, they’ll be told by the exchange that the investor needs to pay a tax or security fee to the exchange. This is often an exorbitant amount that makes the investment not worth it. 66% of people targeted in this scam have lost money.

Like with traditional investments, you should always do your research before committing any money to cryptocurrency. Don’t take any cryptocurrency advice from people you meet online, as they’re often part of the scam. Even friends who message you about investing in cryptocurrency could have had their social media accounts hacked. And the most important advice for any investment is never invest money that you can’t afford to lose.