Bitcoin is the most common currency requested in ransomware cases, one of numerous scams that are becoming increasingly tied to cryptocurrency.
When one of our students told us they were going to drop out of college in August 2021, it wasn’t the first time we’d heard of someone ending their studies prematurely.
What was new, though, was the reason. The student had become a victim of a cryptocurrency scam and lost all their money — including a bank loan — leaving them not just broke, but in debt. The experience was financially and psychologically traumatic, to say the least.
This student, unfortunately, is not alone. There are hundreds of millions of cryptocurrency owners, with estimates predicting further rapid growth. As the number of owners has increased, so has the number of scam victims.
We study behavioral economics and psychology, and recently published a book about the rising problem of fraud, scams and financial abuse. There are reasons why cryptocurrency scams are so prevalent. And there are steps you can take to reduce your chances of becoming a victim.
Crypto takes off — and so do the scams
Cryptocurrencies — decentralized, digital currencies that use cryptography to create anonymous transactions — were originally driven by “cypherpunks,” individuals concerned with privacy. But they have expanded to capture the minds and pockets of everyday people and criminals alike, especially during the COVID-19 pandemic, when the price of various cryptocurrencies shot up and they became more mainstream. Scammers capitalized on their popularity.
A January 2022 report by Chainanalysis, a blockchain data platform, suggests that in 2021 close to $14 billion was scammed from investors using cryptocurrencies. Then, in February 2022, the FBI announced it had arrested a couple who used a fake cryptocurrency platform to defraud investors of another $3.6 billion.
There are two main types of cryptocurrency scams that tend to target different populations.
One targets investors, who tend to be active traders holding risky portfolios. They are mostly younger investors, under 35, who earn high incomes, are well-educated and work in engineering, finance or IT. In these types of frauds, scammers create fake coins or fake exchanges.
A recent example is SQUID, a cryptocurrency coin named after the TV drama “Squid Game.” After the new coin skyrocketed in price, its creators simply disappeared with the money.
A variation on this scam involves enticing investors to be among the first to purchase a new cryptocurrency — a process called an initial coin offering — with promises of large, fast returns. But unlike the SQUID offering, no coins are ever issued, and would-be investors are left empty-handed. Many initial coin offerings turn …read more
Source:: Chicago Sun Times
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