As cryptocurrency becomes more popular for transactions and investments, the number of crypto scams has also increased. Recognizing red flags like pressure to act quickly and shady contact information can help victims stay safe from scammers.
Evaluating the scale of a scam and identifying the specific cryptocurrency involved can help victims determine whether they’re eligible for recovery options. These may include hiring a cryptocurrency lawyer and/or reporting the scam to the exchange.
Reporting the Scam
If you’ve been victimized by a crypto scam recovery, the first thing you should do is report the scammer to the exchange where the theft occurred. This will help them investigate the scam and potentially freeze the criminal’s crypto. While this won’t guarantee you’ll recover your funds, it will encourage the exchange to look for patterns and establish guardrails to prevent similar scams in the future.
In some cases, the same criminals that ripped you off will attempt to scam you again by claiming to be able to recover your lost funds. They will ask you to pay a fee or give them access to your crypto wallet in order to deposit your “recovered” funds. If you comply, the scammers will pocket any fees and gain control of your account.
Some fraudsters also impersonate reputable businesses by issuing their own fraudulent crypto coins or tokens. They may tout a slick website, social media ads and news articles to fool people into investing in their fake products. The DFPI tracks these scams and includes them in its Get Free Consultation for Your Crypto Recovery on Broker Complaint Alert (BCA), which you can search by company name or type of scam to find out more.
Be aware that cryptocurrencies have limited regulatory oversight. The lack of oversight combined with the anonymous nature of crypto transactions makes it difficult to recoup stolen funds. In some cases, the exchange you used will be able to freeze the scammer’s account and return your funds. However, it’s often a futile endeavor.
Documenting the Scam
As more people invest in cryptocurrency, it’s important to be vigilant about potential scams. Recognizing red flags like promises of guaranteed returns, pressure to act quickly, and unauthorized images can help prevent financial fraud and theft of digital assets.
Criminals often promote crypto recovery services on social media or search engines, promising to recover lost investments for a large upfront fee. They may also use fake Reddit or Twitter accounts to describe invented “success stories” in order to bolster their credibility. These accounts are usually brand new, have few posts or show signs of being hacked.
These services may also offer bogus testimonials from made-up customers with rave reviews and high ratings. Some crooks even claim to have been featured in prominent news outlets as a way to add credibility to their nonexistent services.
When you’re dealing with a scammer, be sure to document all communication and transaction records in case of a financial dispute. This will also help authorities investigate and prevent similar crimes from occurring in the future.
It’s also a good idea to report the scam to your local law enforcement agency and the exchange where the fraudulent activity took place. Although this doesn’t guarantee recovery, it can encourage the exchange to examine its security protocols and establish guardrails that will prevent fraudulent activity from recurring.
Identifying the Scammer
Cryptocurrency’s popularity has drawn the attention of scammers, who use illegal schemes like phishing, Ponzi schemes, fake exchanges and other tactics to steal digital assets. Recognizing red flags, such as guaranteed returns and lack of transparency, can help you avoid getting ripped off.
Crypto scams often involve a fraudulent cryptocurrency platform that generates artificial gains to draw in new investors and keep the current ones invested. These scams may also require the victim to transfer more funds before they can withdraw any. Scammers also impersonate reputable organizations, such as law enforcement or utility companies, to trick victims into transferring money through bogus exchanges and wallets.
Another common technique is the “pump-and-dump” scheme, where a fraudster buys up an obscure cryptocurrency at a low price, then dumps it to profit from artificially inflated prices. Before you invest in a coin, always search it on Google with words like “scam,” “review” or “warning” to see what others are saying.
If you’re unsure of an investment’s legitimacy, look at the coin’s blockchain records and its team members. Ideally, the people behind a cryptocurrency project should have searchable names and an active social media presence. Overzealous marketing and excessive claims are red flags as well. Taking the time to research and document your case will help you recover your losses, even if authorities can’t guarantee recovery.
Legal Action
Taking legal action against scammers is an important step in the recovery process. However, it can be challenging to determine jurisdiction because cryptocurrencies transcend physical borders. In addition, the decentralized nature of blockchain technology complicates matters further. Therefore, it is crucial to identify the cryptocurrency associated with the scam to better understand how to proceed with recovery efforts.
Depending on the scope of the scam, victims may need to examine their cryptocurrency exchanges and wallets for relevant information, analyze blockchain records, or seek assistance from online communities. Furthermore, they should also be mindful of how much value was transferred to a particular cryptocurrency address. A high-value cryptocurrency transaction could warrant a seizure warrant in criminal Court or a garnishee order in civil proceedings.
Another important step is to report the incident to local and federal law enforcement authorities. This can increase the chances of recovering funds from scammers. However, it is worth noting that with the massive increase in crypto scams, many authorities are overwhelmed and may not be able to investigate every case. The threshold loss amount for investigation has also increased, meaning that it can be difficult for victims to persuade authorities to accept their cases.
In some cases, scammers will impersonate the government or a legitimate organization and claim that they can recover lost funds. They will typically require victims to pay a fee upfront or give access to their cryptocurrency accounts. These requests are typically red flags. Legitimate recovery services will never ask for payment or access to your funds.
