Cryptocurrency Recovery Scams
What’s worse than being scammed and losing some or all of your crypto? How about being scammed twice or even several times? This is, unfortunately, a very real risk in the world of trading currency, whether you’re trading in crypto, forex or any other tradable commodity. Scams designed to steal funds from those attempting to regain access to some or all of their stolen cryptocurrency are called recovery scams.
Why Do Scams Occur?
Cryptocurrencies as a whole are more highly valued than ever before, despite little ups and downs in the market. This means it is more profitable than ever to behave in fraudulent ways to liberate people from their coins. A further reason is the weight the crypto community places on self-regulation, which opens gaps for those who don’t wish any of us well. People new to the crypto world, colloquially referred to as ‘newbies’, are frequently the targets of a crypto scam.
How Do Scams Occur?
The ways crooks can scam people are manifold. Some firms and individuals promise that you can earn money quickly to achieve financial freedom. Then some scams try to get you to stake some of your coins into a type of pyramid or Ponzi scheme that will encourage others to join up for a return on your investment; the more coins you stake, the higher the percentage of your profits. Similarly, others attempt to send you invitations to help recruit investors, sell or mine cryptocurrency, or “pay” you to convert fiat currency (traditional money) into Bitcoin (a money laundering job scam). In fact, they only want your money. Some even want you to participate in a scam with the promise of embezzling some poor soul’s funds, only to gain access to your information or coins. In this particular case, you may have had it coming.
What Other Kinds of Scams Are There?
There are giveaway scams (the fraudster wants your information), investment scams, ICO (initial coin offering) scams fake sites that lure you into signing up for a particular service, phishing scams and even fakers assuming the identity of people trusted by the online community via social media, whether that be on Twitter, Telegram or Instagram. Increasingly, in an international context, fake news sites and even legitimate community news sites or bulletin boards are being used to link to malicious sites operated by fraudsters. And then, just when you thought this kind of thing only belonged to former incarnations of the internet, there are still sob stories and blackmail attempts being carried out today, usually via email, just like in the good old days of internet scams.
What Are Some Key Indicators of Cryptocurrency Scams?
- A guarantee that you will make money: If anyone promises that you’ll make a profit, it’s more than likely a cryptocurrency scam. Remember that scammers can easily fake endorsements from well-known celebs or people active in the community.
- Scammers promise large payouts with guaranteed returns: Nobody can guarantee a set return, say, double your money, much less in a short time.
- Promising free money or coins: A scammer might promise you cash or cryptocurrency, but free money promises are always fake.
- Making big claims without details or explanations: All good investment advisors want to share that information and ensure an appropriate level of transparency. People want to know how an investment works and where their money is going.
- Only pay with crypto: One sure sign you are about to get scammed is someone insisting a cryptocurrency payment is the only way to buy a particular service or product.
How Does a Recovery Scam Work?
Once someone has been scammed, how do scammers go about re-victimising the person who got scammed? Unfortunately, if you have been a victim of cryptocurrency fraud, it is especially wise to be extra vigilant. This is because you could be scammed by those who did the job the first time. But that’s not the only issue. There is a black market for the information of those who have been victims.
What Do Scammers Need to Know?
Crucial information that scammers want is often, but not exclusively, traded on the dark web. This is known as recycling victims. The info can include many things, including how much crypto scammers took, the victim’s personal information, and contact details. In some cases, all a faker needs is your name, phone number, and email address.
How Can You Avoid Cryptocurrency Recovery Scams?
Fraudsters employ various creative techniques to lure you in to build up your hopes of getting some or all of your losses back. The way to do so is invariably to create the appearance of legitimacy so that the victim trusts this company enough to do the legal and/or detective work needed to regain their funds. They provide services under various guises, often along the lines of: ‘fraud recovery experts’, ‘blockchain investigators’ or ‘trading scam recovery service’.
Signing up for such services and giving away your details is precisely what fraudsters need to carry out another heist. This may happen via email or on a fraudulent site. It may also occur on one or several phone calls with a scammer who will be well-practised at gaining your trust and exploiting your emotional condition due to your previous scam. The trickster on the phone may pose as a government official, someone from the Financial Services Complaints Ltd (FSCL), a lawyer or an employee of a financial recovery service.
It could be that a victim is informed that the Bitcoin scammers have been caught. They are told a retainer needs to be paid to a lawyer to fulfil the necessary paperwork obligations. Similarly, they may advise the victim to pay a fee to a governmental department or a percentage of court fees for a class action lawsuit. Note that we do not have class actions as such in New Zealand. However, a related type of proceeding that is becoming more common is the legal area of representative actions. It seems to be a somewhat opaque part of our legal system with ancient roots, so don’t count on this being the go-to in helping you recover any coins.
Often, a victim is informed that “someone” will repay their losses if they pay overdue taxes. Posing as a tax department representative is seemingly common, especially in the United States. In New Zealand, we have been spared this kind of scam, for the most part; however, it always pays to remain vigilant.
For more information on avoiding scams specific to New Zealand, have a look at the latest news on Netsafe’s site, an organisation affiliated with the Ministry of Justice, which aims to help keep Kiwis safe from scams, both on- and offline.
There is a lot to be aware of, as you can see. To sum it all up, it’s crucial to be mindful of the different types of scams out there, both initially and in terms of asset recovery scams. Keep in mind there is no hard and fast way to get your money back, and the best thing is to be safe rather than sorry when handling your Bitcoin or other cryptocurrencies. Cryptocurrency transactions are virtually irreversible – as per the nature of blockchain. Being reasonably sceptical and double-checking any person or site should be part of the necessary due diligence of anyone holding crypto. This applies doubly to anyone who has, unfortunately, been a victim of a scam already. Be extra careful to verify the credentials of anyone you’re contacting or who is contacting you, whether directly or indirectly, about any lost crypto. In short, always take security seriously.
BitPrime has a comprehensive guide covering many common crypto scams, where to find support if you’ve been scammed, and info on how to report suspected scams. Additionally, you’re welcome to contact us for a confidential conversation or advice at email@example.com.
About the Author:
The above references an opinion and is for informational purposes only. Do not take this as personalised financial advice or investment advice. The views expressed by the author do not necessarily represent the opinion of BitPrime.
Last updated: 12/01/2022