There’s a new cryptocurrency scam to watch out for, the Federal Trade Commission warned this week.
The scam is a “new spin” that involves an impersonator, a QR code, and a trip to a store to send money through a cryptocurrency ATM, according to a release posted by the FTC. The scammers are mostly posing as the government, law enforcement, prize promoters, or local utility companies.
“Here’s the main thing to know: Nobody from the government, law enforcement, utility company, or prize promoter will ever tell you to pay them with cryptocurrency. If someone does, it’s a scam, every time,” said Cristina Miranda with the FTC’s division of consumer and business education in the statement.
The FTC’s warning comes amid a sharp rise in cryptocurrency crimes. In 2021 alone, scammers took $14 billion worth of crypto, according to a recent report from blockchain data firm Chainalysis. That’s nearly twice the $7.8 billion taken by scammers in 2020, the report shows.
How Investors Can Protect Their Crypto
If you’ve incorporated crypto into your investment portfolio or are interested in investing in Bitcoin or Ethereum in the future, here are some steps you can take to protect your crypto:
Watch for Crypto Red Flags
There are some common red flags in crypto — similar to classic money wiring scams and credit card fraud — that you should keep an eye out for. They include:
- Typographical errors and obvious misspellings in emails, on social media posts, and during any communication
- Promises to multiply your money
- Contractual obligations that lock you into holding crypto without being able to sell
- Fake influencers or claims to be a celebrity
- Psychological manipulation like blackmail or extortion
- Large social media crypto schemes
- Promises of free money
- Vague details about where your money is going
Protect Your Digital Wallet
Another way to protect your crypto is to implement good digital security habits, similar to how you’d handle large sums of cash by putting them in a safe or FDIC-insured savings account.
Experts say small-scale investors with a few hundred dollars in crypto are probably OK keeping it on a mainstream exchange like Coinbase. But if you have a significant amount of crypto, you can incorporate a crypto wallet for additional safekeeping.
There are two types of crypto wallets: hot wallets and cold wallets.
Hot wallets are used to store crypto online. They are secure, but more susceptible to hacking than cold storage, which is when you store crypto offline on a piece of hardware. Think of cold storage as kind of like a safe in USB-drive format. It’s more secure, but if you forget your password or lose the device, you could lose access to your money forever.
Because crypto held in hot wallets is not FDIC-insured, you’ll want to make sure that whatever platform or wallet you store your crypto in has robust security measures, including:
- Two-factor authentication
- Storing a portion of holdings in its own cold storage
- Private insurance policies in case of theft or hacking (separate from FDIC insurance)
Keep Track of Your Wallet Keys
You only get one unique key to access your wallet, which means you need to be extra careful about not losing your key or having it stolen. Don’t share your private key with anyone, just like you wouldn’t share your Social Security number or your debit card PIN. Maintaining strong passwords that you update regularly and not using the same password for multiple accounts will make you less vulnerable to hacks and scams.
Make sure to report fraud and other suspicious activity to whatever crypto exchange you used to complete the crypto transaction and to the following bureaus using these links:
- The FTC: ReportFraud.ftc.gov
- The Commodity Futures Trading Commission (CFTC) at CFTC.gov/complaint
- The U.S. Securities and Exchange Commission (SEC) at sec.gov/tcr
If the fraud involves extortion or blackmail, you can also go to the FBI.