Attorney General Kwame Raoul on Wednesday encouraged Illinoisans to learn more before using or investing in cryptocurrency to avoid falling victim to cryptocurrency scams.
Cryptocurrency is a type of digital currency purchased using a computer or smart device. There are many different cryptocurrencies that can be bought, sold, and traded on cryptocurrency “exchanges”; used to purchase goods and services; or held as investments. However, cryptocurrency can be risky because it can be lost or stolen, and prices are more unpredictable than traditional assets, Raoul explains in a press release.
Unlike traditional money, assets, or stocks, cryptocurrency and cryptocurrency exchanges are not significantly regulated by any government, centralized bank, or organized exchange. Without significant oversight, it is easier for fraud to occur and harder to undo fraudulent transactions. More importantly, there is no guarantee that lost or stolen cryptocurrency will be returned.
“Recent high-profile scams involving cryptocurrencies underscore the need for consumers to be hyper-vigilant when dealing with anyone claiming to be selling or providing information relating to the volatile world of cryptocurrencies,” Raoul said. “The unregulated cryptocurrency market has provided countless examples of massive investment gains and losses, fueling high profile publicity and an associated increase in fraudsters seeking to take advantage of consumers.”
The Attorney General’s office is aware of reports that people have been contacted by scammers who pose as cryptocurrency investors and promise large investment returns or offer cryptocurrency investment advice. These scammers demand that the money be sent directly to them or refer people to a website or app that looks genuine but is controlled by the scammer. Individuals may receive reports that they have seen a return on their investment, but these statements and websites are generally false, the statement said.
Instead, the scammers have often already taken the investor’s money and disappeared. In some cases, scammers may claim that investors have to pay fees, taxes or verify their account in order to receive their winnings. At this point, the scammers have already taken the investors’ money and are trying to extract additional funds.
Raoul offered the following recommendations to help people avoid losing money to cryptocurrency scams:
- Understand the basics of cryptocurrency before investing. Scammers know that cryptocurrency is new and complex and many people won’t ask for details. Do not invest with anyone who cannot explain investment details in plain language or who claims to want to exploit some aspect of the cryptocurrency market, or that your investment involves little or no risk.
- Never invest money that you cannot afford to lose. The cryptocurrency has one of the highest volatilities – or fluctuating prices – in the market. Investments can fall based on a single event or in a single day.
- Beware of cryptocurrency opportunities that encourage you to recruit other investors. Returns associated with incentives based on the number of people you add to the network or business may be a sign of a illegal pyramid scheme. Although you may initially receive relatively small profits, all the money really goes to investors at the top. As with pyramid schemes, investors at the bottom will have nothing left if, for example, a cryptocurrency turns out to be fraudulent.
- Beware of anyone you don’t know who asks you to buy or send cryptocurrency for a specific purpose. Many cryptocurrency scams are similar to scams involving gift cards, wire fraud, and other currencies. Familiarizing yourself with common scams, such as government impersonation or romance scams, can thwart a fraudster’s attempts to steal your money. Additional information on scams can be found on the Attorney General’s website.
- Don’t invest with someone who offers guaranteed or suspect rates of return. Return guarantees with high percentages and promises that your initial investment will be doubled or tripled can be hallmarks of a Ponzi scheme. Investments, especially those seeking high returns, fluctuate over time due to constantly changing market conditions.
- Remember that most unsolicited messages about investment opportunities are scams. Scammers can easily reach you by texting, calling, emailing, or using direct messaging apps or social media. Beware of any unsolicited communication that asks you to invest in a cryptocurrency opportunity, offers to help you earn money in cryptocurrency, or asks for your financial information. Legitimate entities such as the Internal Revenue Service, US Postal Service, or state government agencies will not contact you via text message.
- Don’t invest in cryptocurrency just because it’s been endorsed by a celebrity. Recently, several celebrities are alleged to have violated securities laws related to their crypto endorsements. Remember that celebrities, and even reputable news stations and news websites, are often paid to promote products.
- Do your homework before investing in any cryptocurrency. Recently, scammers have created fake exchanges, investment platforms, or cryptocurrency staking or mining services. Consumers who thought they were investing in the next big thing were actually sending their cryptocurrency directly to a scammer. A dedicated scammer may even create fake social media profiles or websites touting the reputation and success of their new platform or investment opportunity.
- Protect your privacy online when accessing cryptocurrency. Use a secure network and never share your password or digital wallet key. Consider using a virtual private network when accessing and exchanging cryptocurrency.
Raoul encourages consumers who believe they have been the victim of a cryptocurrency scam to report the scam by visiting the Attorney General’s website or by calling Raoul’s Consumer Fraud Hotlines: