Investment Scam Tracker

What are red flags of potentially fraudulent digital asset investments

• You are guaranteed, oversized returns.
• You are promised there is little or no risk.
• You are invited to invest by someone you met online.
• You are unable to withdraw your funds unless you invest more money.
• There is no physical address or customer service phone number.
  
• You cannot verify the identity of the offeror.

Is cryptocurrency a safe investment

Cryptocurrencies can be unstable investments due to high investor losses due to scams, hacks, bugs, and volatility. Further, the technical complexity of using and storing crypto assets can be a significant hazard to new users. Here are some additional risks:

• User risks: Unlike traditional finance, there is no way to reverse or cancel a cryptocurrency transaction after it has already been sent. By some estimates, between 20% to 29% of all bitcoins are now inaccessible due to lost passwords or incorrect sending addresses.
• Legal risks: The legal status of some cryptocurrencies is evolving, with regulatory agencies, tax authorities and central banks considering and passing new laws that may impact holding and trading cryptocurrencies.
• Counterparty risks: Many investors rely on exchanges or other custodians to store their cryptocurrency. Theft or loss by one of these third parties could result in losing one's entire investment.
• Management risks: Recent bankruptcies of cryptocurrency trading platforms (BlockFi, Voyager, Celsius, FTX) have disclosed deficient and even deceptive risk management practices. Many investors have lost large sums to management teams that failed to properly manage risks.
• Programming risks: Many investment and lending platforms use automated smart contracts to control the movement of user deposits. An investor using one of these platforms assumes the risk that a bug or exploit in these programs could cause them to lose their investment.
• Market manipulation: Market manipulation remains a substantial problem in cryptocurrency, with influential people, organizations, and exchanges acting unethically.
  

What is Cryptocurrency

A digital or virtual currency secured by cryptography and based on a network that is distributed across many computers.

What is Blockchain

A digital database or ledger that is distributed among computer network nodes. The databases or ledgers can be viewed using various blockchain explorers (i.e., blockchain.com, etherscan.io, etc).

What are public and private keys

A public key is a cryptographic code used to facilitate transactions between parties, allowing users to receive cryptocurrencies in their accounts. A private key is made available only to its user and authorizes the user to facilitate transactions (i.e., spend, withdraw, or transfer) for the user's account. The public key is used to verify the digital signature, which proves ownership of the private key.

What are cryptocurrency wallets

A device, physical medium, program, or server which stores the public and/or private keys for cryptocurrency transactions. Cryptocurrency itself is not in the wallet, instead it is stored and maintained on the blockchain. Wallets may be custodial or noncustodial. Custodial wallets are hosted by a third party that stores your keys for you. Noncustodial wallets are wallets in which you take responsibility for securing your keys.

What is a stablecoin

A cryptocurrency which has value pegged, or tied, to that of another currency (i.e., U.S. dollar), commodity (i.e., gold), or financial instrument.

What is a Non-Fungible Token (NFT)

A unique digital identifier that is recorded on a blockchain and is used to certify ownership and authenticity. NFTs typically contain references to digital files such as artworks, photos, videos, and audio. Because NFTS are uniquely identifiable, they differ from cryptocurrencies, which are fungible.

Advance Fee Scam

Scammer requests an upfront payment, promising a future service or huge return on investment.

Affinity Scams

Asset Recovery Scam

Scam by a third party requiring a fee to "recover" funds lost in a prior fraudulent transaction.

Bait and Switch Scams

Scam to mislead buyers, whereby a seller advertises an appealing but ingenuine offer to sell a financial product or service that the seller does not actually intend to sell. Instead, the seller offers a sub-par, defective, or unwanted product or service. For crypto, this might be most relevant to non-fungible tokens.

Crypto Blackmail Scam

Scammers send emails or physical mail to victims claiming to have the victim’s personal information or embarrassing photos or videos of the victim. The scammer then threatens to make this information public unless the victim pays them in cryptocurrency.

Fraudulent Trading Platform

Scammer develops a fraudulent website or application and convinces victims to deposit funds to the platform under the guise of providing victims access to a unique investment opportunity. The fraudulent platforms appear legitimate, even going as far as replicating price movements and producing artificial gains.

Hacking

Exploiting a computer system or private network inside a computer with the intent of stealing personal information, such as passwords and bank account information, for financial gain.

High Yield Investment Programs (HYIP)

Ponzi schemes that promise passive income and high returns in short periods of time through an investment of crypto assets. These schemes often offer payment structures like that of multi-level marketing or pyramid schemes to recruit new investors, promising early investors a percentage of the profits of other investors they recruit. These schemes are usually heavily promoted through social media and may use paid social media promoters to market their product.

Identity Theft

Crime in which someone wrongfully obtains and uses another person's personal data in some way that involves fraud or deception, typically for economic gain (aka identity fraud).

Imposter Scams

Scammer impersonates a legitimate business, government agent, or well-known figure to gain access to a user's systems and personal information for financial gain (e.g., to steal the user's assets).

Liquidity Mining Scam

Liquidity mining is an investment strategy used to earn passive income with crypto assets. Investors stake their crypto assets in a liquidity pool to provide traders with the liquidity to conduct transactions. In exchange, investors receive a portion of the trading fees. In the liquidity mining scam, victims move cryptocurrency from their wallets to the liquidity mining platform and see the purported returns on a falsified dashboard (FBI Public Announcement). Believing their investments to be a success, victims purchase additional cryptocurrency. Scammers ultimately move all stored cryptocurrency and investments made to a scammer-controlled wallet.

Livestream Scam

Scammer broadcasts a livestream event through an online streaming platform (e.g., YouTube, Twitch) to market a fraudulent promotion or product. Promotions typically offer questionable terms that are too good to be true and may request payment through crypto assets.

Mirror Trading

A strategy in which traders or investors mimic others by implementing the same trades that others do in the trader's own account.  It can be done in both forex and stock markets but is more common in forex trading.

Pig Butchering Scams

Scammer may use a variety of methods to establish a relationship (either social, romantic, or business focus), and then gain the victim's confidence and gradually introduce the victim to a fraudulent investment opportunity. In most cases, scammer will approach victims through social media or dating apps, ask to take the conversation to a different platform (e.g., WhatsApp, WeChat, Telegram), and then communicate regularly with the victim to establish the relationship. Once scammer has the victim's trust, scammer will then propose an investment opportunity related to crypto assets. Scammer will offer to train the victim to set up an account on an exchange to purchase crypto assets, and then provide a website or wallet address for the victim to transfer funds in order to participate in the investment opportunity. The fraudulent platform investment opportunity is often designed to appear legitimate, and often produces artificial gains to keep the victim engaged in the platform and possibly deposit more funds. However, the victim is never able to withdraw their funds from the site and may be asked to transfer even more funds before anything can be withdrawn through a variety of excuses (e.g., service fees, IRS taxes, etc.).

Ransomware

Scammer gains access to a victim's computer systems or private network, encrypts sensitive information or data, and demands a ransom from the victim to restore access to the encrypted information or data upon payment. Scammer will then provide detailed instructions on how to pay the fee to get the decryption key and may accept payment in crypto assets.

Romance Scam

Usually initiated through random texting or online by fraudsters who create online profiles and attempt to build phony emotional attachments until the victims are comfortable sending them money. To build trust these scammers may look through social media and dating sites for posts divulging personal information about their victims’ lives. Persons of all ages are vulnerable to these types of scams.

Rug Pull Scam

Variation of investment scheme where a developer attracts investors to a new cryptocurrency project (e.g., a new token or initial coin offering) through online crowdfunding, pumps up the value of the investment, and then pulls out before the project is built, leaving investors with a worthless currency.

Tech Support Scam

Tech support scammers want victims to believe they have a serious problem with their computer, like a virus. They want victims to pay for tech support services the victims don't need, to fix a problem that doesn't exist. They often ask victims to pay by wiring money, putting money on a gift card, prepaid card or cash reload card, or using a money transfer app because they know those types of payments can be hard to reverse.