JFD FORENSICS LLC. understands cryptocurrency trading risks and offers proven strategies for tracing your crypto’s path through the blockchain to uncover the identity of the bitcoin scam and the party who cashed your money out. That is the essential first step in any crypto recovery.
The entire virtual currency market reached a capitalization of nearly $2 trillion dollars in just 12 years. By the end of 2017, the price of a single bitcoin was $13,889.99. It is no coincidence that just a few weeks later the U.S. Commodity Futures Trading Commission (CFTC) filed the first three lawsuits against bitcoin scams. The suit accused the individuals who ran them of fraud, misrepresentation, and misappropriation of bitcoin.
Is cryptocurrency high-risk? Yes, it can be. Criminals eye digital currency because it promises instant profit. Law enforcement authorities in every major country are constantly on the alert for crypto scams in general and bitcoin scams in particular. They are the most dangerous cryptocurrency trading risks.
That is especially true since February 16, 2021, when the cost of one bitcoin reached $50,000 for the first time. In the second quarter of 2021, the U.S. Federal Trade Commission (FTC) estimated that approximately 14% of losses to imposters of all types were being paid in cryptocurrency.
How much do victims of bitcoin scams lose? According to the FTC, 7,000 Americans reported losing the equivalent of more than $80 million to crypto scams between October 2020 and April 2021. Shockingly, that figure is more than 12 times the total during the same six-month period the year before.
Every bitcoin scam is inventive. The criminals who are behind bitcoin scams and other types of crypto scams never cease to come up with new ways to steal your coins. Is bitcoin a high-risk investment? Consider this: One report claimed that during the COVID-19 pandemic bitcoin scams involving extortion shot up by 1,300% in one month alone. Most of these bitcoin scams involved sextortion.
Quite literally, operators of bitcoin scams think of everything. Want to commit suicide? There are Facebook pages advertising poison pills you can order by paying in bitcoin. Apart from the brashness and ghoulishness of it, the pills are fake. The bitcoin scam wasn’t. It was real. And the bitcoin that was paid (and lost) was also real.
Since 2015, moreover, cryptocurrency has become the payment of choice for kidnappers. Since then, bitcoin ransom has been demanded by kidnappers in at least 12 countries as the price for freeing their hostages.
What are the most common cryptocurrency trading risks? How do bitcoin scams and other crypto scams work? What are the risks involved in investing in bitcoin? Most victims report falling for one of the six types of crypto scams below.
This is a veteran crime perfected by Jordan Belfort and popularized in the movie The Wolf of Wall Street. Scammers “pump up” or promote an “altcoin” they own in bulk and then sell it off in bulk once the price peaks. Of course, they were the ones who peaked the price in the first place by artificially increasing demand. What made Pump and Dump especially viable for crypto criminals and especially dangerous for crypto investors was the glut in under-sold bitcoin alternatives (there were 45 of them by the end of 2017). By the way, speaking from his own experience, Belfort called cryptocurrencies “a wolf in sheep’s clothing.” He added that initial coin offerings (ICOs), the gateways for new cryptocurrencies, were “the biggest scams ever.”
They may be popular, but the only ones who profit from online crypto “clubs” are the criminals who run them. Their sites certainly look legitimate. They’re sure to feature photos of satisfied members who claim they made megabucks by trusting the hidden cryptocurrency pros who stand behind the curtain. But the last time you see your assets will be when you hand them over to these bitcoin scams.
One example of an investment club based on cryptocurrency was Eastern Metal Securities (EMS), which operated from 2012 through 2019. Its investors were told that their shares, which they purchased in bitcoin and Ethereum, would eventually yield a return equivalent to 1.15 kilograms of gold.
The owner of EMS, Roger Nils-Jonas Karlsson, who was referred to in the press as a “Swedish crypto gangster,” pleaded guilty to securities fraud, wire fraud, and money laundering in a U.S. court in 2021. He was sentenced to 15 years in prison and fined $16,263,820, which is roughly the sum investigators claimed his bitcoin scam stole from investors, who will be compensated for their losses.
Fake cryptocurrency exchanges are easy to find. This type of crypto scam is all over cyberspace. They are especially dangerous for first-time investors, who will find it hard, if not impossible, to distinguish fake exchanges from legitimate ones. In December 2017, Korean authorities closed down one of them, BitKRX.
What was particularly pernicious was that BitKRX usurped the last three letters of its name from KRX, the Korean Stock Exchange. It purposely misrepresented itself in order to provide itself with a veneer of legitimacy. A fake exchange is a very useful front for a bitcoin scam.
No crime fits cryptocurrencies as well as fake wallets, do. “Altcoins” are bytes of data, rather than metal. Therefore, owners have to park them somewhere online in a “digital wallet.” Innovative criminals with good marketing skills set up their own crypto scam digital wallets. They then aggressively advertise for customers to come along and park their digital currency. Once they do so, their cryptocurrency disappears forever. The operators of the fake digital wallet fade into the digital sunset. Another ideal venue for crypto scams.
Needless to say, most cryptocurrency investors acquire digital currency because they believe that their investments are going to appreciate in value at a rapid pace. So why would someone offer you a higher interest than the market currently bears? The most obvious answer is that the offer is a red light for crypto scams in the form of a Ponzi or pyramid scheme.
One such bitcoin pyramid scheme, GladiaCoin, promised to double the value of all bitcoin deposits within 90 days. It collapsed from its own weight in June 2017. The paradigm continues to pop up. All online bitcoin scam pyramid schemes that employ the same “double your money in 90 days” business model eventually have to collapse. The main difference between the operators of these sites and Charles Ponzi, who gave his name to this type of scheme, is that these guys, unlike the late Mr. Ponzi, are anonymous.