Contributed by the Federal Trade Commission (United States)
Cryptocurrency has recently become a popular way to invest, and a common form of payment. But scammers are also taking advantage of people’s understanding (or not) of how cryptocurrencies work.
Cryptocurrency is a type of digital currency that generally only exists electronically. There is no physical coin or bill, unless you use a service that allows you to cash in cryptocurrency for a physical token. You usually exchange cryptocurrency with someone online, with your phone or computer, without using an intermediary like a bank. Bitcoin and Ether are well-known cryptocurrencies, but there are many different cryptocurrency brands, and new ones are created all the time.
Complaints about Miscellaneous Investments, which includes complaints about fake cryptocurrency investments, were over 200% higher in 2021 than they were in 2019. Econsumer.gov Complaint Trend Data shows that Miscellaneous Investments were the second most reported scams of the year.
If you are thinking about investing in cryptocurrency:
- Research before you invest. Search online for the company and cryptocurrency name. Use keywords like “review,” “scam,” or “complaint.”
- Be wary of guarantees, and big promises. Scammers often promise you will make money quickly, or that you will get big payouts or guaranteed returns. They might offer you free money paid in cash or cryptocurrency — but, even if there’s a celebrity endorsement, do not buy it. You will make money if you are lucky enough to sell your crypto for more than you paid. Don’t trust people who say they know a better way to make money with cryptocurrency.
- Know that cryptocurrency accounts are not regulated or insured by a government like national currencies deposited into a bank account. That means that, if for example, you store cryptocurrency with a third-party company, and the company goes out of business or is hacked, the government has no obligation to step in and help get your money back.
- Cryptocurrency payments do not come with legal protections. Credit cards and debit cards have legal protections if something goes wrong. For example, if you need to dispute a purchase, your credit card company may have a process to help you get your money back. Cryptocurrencies typically do not. Moreover, anyone who says you have to pay by cryptocurrency, wire transfer, or gift card is a scammer. If you pay in those ways, there is usually no way to get your money back.
If you believe you have encountered this kind of scam, report it to: