Considering an investment in cryptocurrency? Make sure you understand how it works and keep up on the scams it generates.
Cryptocurrency is a form of payment that can be exchanged online for goods and services or held as an investment. Common types of cryptocurrency are Bitcoin, Ethereum, Dogecoin, Tether and Polkadot.
Cryptocurrencies work using blockchain, a technology that manages and records transactions across many linked computers. Users buy cryptocurrency through an online exchange platform. Others earn cryptocurrency through a complex process called “mining,” which requires advanced computer equipment to solve highly complicated math puzzles.
Potential investors should do their research first – cryptocurrency is complex and not regulated by any state or federal government agency. As a starting point, here are some things you should know:
Impostor wallets: Cryptocurrency is stored in a “digital wallet,” which can be online, on your computer or on an external hard drive. A mobile payment or digital wallet app simply refers to a program you use on your smartphone that allows you to quickly and easily send funds to someone else. Make sure to confirm that you are sending funds to the correct wallet. Scammers use impostor wallets to redirect funds intended for someone else.
Social media scams: If you read a tweet, a text or an email message, or get a message on social media, directing you to send cryptocurrency, it’s likely a scam. Once you send cryptocurrency, it’s gone; your money cannot be recovered.
Referral scams: Referral scams work in a similar way to pyramid schemes. This scam depends on recruiting investors in several investment tiers, with the idea being that the more you invest and get others to invest, the greater your return. The scam comes when investors attempt to withdraw their supposed profits: They are told to invest more cryptocurrency and get nothing back.
Giveaway scams: Giveaway scams falsely proclaim to be sponsored by celebrities and tell potential victims they are guaranteed to immediately multiply the amount of cryptocurrency they are asked to send. Typically, victims don’t get any jackpot, award or any other giveaway; they have been duped. Investors lose the value of whatever crypto they sent.
Romance scams: Scammers are using online dating sites to recruit new investors in sham crypto investments under the ploy of a legitimate romance. Always be suspicious if someone you have met only online is encouraging you to invest in a product or send money, especially if the request is for cryptocurrency. Much like the use of gift cards in scams, once you give cryptocurrency to another person or account, it is almost impossible to retrieve.
Need help addressing a consumer problem or question? Contact the Ohio Attorney General’s Office at www.OhioProtects.org or 800-282-0515.