Cryptocurrency scams through social networks have gained momentum in the last year, generating a loss of approximately $785 million.
"Cryptocurrency, also called virtual currency, is a type of digital currency that exists only electronically. Generally, to buy a cryptocurrency you use your phone, computer or a cryptocurrency ATM. The best-known cryptocurrencies are Bitcoin and Ether, but there are several different brands, and new cryptocurrencies are being created all the time," the Federal Trade Commission notes in its website.
Cryptocurrencies - digital currencies - have become popular in recent years. Elizabeth Kwok, deputy director of Technology and Litigation Analysis at the Bureau of Consumer Protection, explained at a press conference hosted by Ethnic Media Services and the Federal Trade Commission, that this type of digital currency works with a peer-to-peer system, so there is no intermediary to insure the user.
"They are not backed by a government...there is no one overseeing the system to ensure that the value is stable and that consumers can depend on it for some kind of purpose," Kwok said.
He also pointed out that because the value of cryptocurrencies is not stable, users cannot rely on it to buy items or pay for services, however, he noted that those who use it, do so to invest, "the more traditional form of financial entities are allowing consumers to do that, it is used as an investment, not as a form of payment," he said.
He also pointed out that one of the greatest benefits is the speed of transactions, the possibility of avoiding transaction fees and even anonymity.
How to identify cryptocurrency scams?
Cristina Miranda, Consumer Education Specialist at the Federal Trade Commission's Division of Consumer and Business Education, explained that the reason why cryptocurrency scams have increased in recent years is because, since there is no authority to regulate them, many times, transactions are irreversible.
In addition, he pointed out that social networks and people's lack of knowledge about cryptocurrencies have caused users to be very enthusiastic about investing or earning large amounts of money.
There are several alerts to identify a scam
-Guaranteed profits and high yields
-Mandatory cryptocurrency payments
-Investment tips on social networking or dating applications
"If someone sees a tweet, a text, an e-mail or something saying pay with cryptocurrency, that's fraud," Miranda warned.
He further stated that users should be cautious when offered to make quick money or guaranteed a return or profit and that scams can come in the form of investments, dating apps, fraudulent job offers, e-mails, text messages, imposters and even extortion.
Youth and minority populations are most likely to be scammed
On the other hand, Kwok pointed out that those who are more likely to fall into this type of scams are young people between 18 and 35 years old as well as minority populations, because they are usually outside the traditional financial services system, that is, they do not have bank accounts or do not have enough resources to use credit or debit cards. "There is a narrative that bank accounts are for rich people," he pointed out.
"It's so easy to fall into this trap" recounted Jeffrey Vaulx, a special education teacher in the Memphis City School District, who was scammed through the social networking site Facebook because of his interest in investing money and making a profit without knowing about cryptocurrencies.
Vaulx noted that he was initially suspicious of the information the scammer provided, so he did some research on Google, however he found no warning signs and continued with the process he was instructed to follow, until he was asked for more money to receive his winnings, he noticed the signs that he was actually being scammed.
"The real red flag was when he told me that I would have to pay for the funds to be delivered, I lost about a thousand dollars," Vaulx said and advised caution on social networks to avoid falling for scams.
At the end of the press conference, the panelists recommended to be alert to any sign of scam and in case of being scammed, to contact the platform where they were operating, in addition to reporting the facts in all the platforms intended for this purpose, because although it is not possible to recover their money, this can help the investigation of this type of scams.
In case of being scammed or noticing any kind of suspicious activity you can report it to https://reportefraude.ftc.gov/#/ , https://www.cftc.gov/complaint, https://www.sec.gov/tcr and https://www.ic3.gov/Home/FileComplaint.
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