Dec. 27, 2022
The Oregon Division of Financial Regulation (DFR) warns cryptocurrency investors to do their homework before giving any money to a crypto trading platform.
Many crypto trading apps or websites are really just fake platforms set up by scammers to take investor money and give nothing in return. Investors are promised huge returns in a short amount of time and will see account balances increase rapidly, but will not be able to withdraw funds without having to deposit more money in “withdrawal fees” or “taxes.” The scammer will continue extorting these fees until an investor becomes suspicious. After that, the account is drained and the scammers are gone, along with the investor’s funds. Before transferring money to a crypto trading website or app, research the company and web address to make sure it is legitimate.
Scammers will also look for opportunities to re-victimize those who have already been harmed and are trying to find ways to recover their losses. For example, a recent scam involved a website claiming to be managed by the U.S. Department of State, stating it was working to get FTX customer assets returned to them, following the collapse of FTX (read more about the FTX collapse). The website asked for the investor’s FTX username and password, along with other account information. The U.S. Department of State did not create this website. Please be advised that if anyone contacts you asking for usernames and passwords for your accounts, it is more than likely a scam.
“The crypto trading market is fluid and full of people trying to take advantage of you,” said TK Keen, DFR administrator. “We have said this before, but if it sounds too good to be true, it probably is. We encourage everyone to do their homework and invest wisely, and be diligent in protecting their usernames, passwords, and other sensitive data.”
According to the North American Securities Administrators Association, there are many common schemes fraudsters exploit as new investment products or opportunities. Some of them are:
- Fake digital wallets: A digital wallet is used to store, send, and receive cryptocurrencies. Scammers design a fake digital wallet to lure users into providing their private key or code that enables the wallet to open. Once scammers receive the private key, they can steal all the cryptocurrency from the owner’s digital wallet.
- Pump-and-dumps: Groups of individuals coordinate to buy a thinly-traded cryptocurrency, promote the cryptocurrency on social media to push up demand and the price, and then sell it in a coordinated sale. The price plummets and those unaware of the scheme are left with the devalued cryptocurrency.
- Multi-level marketing platforms: Companies lure investors through the promise of high interest with low risk. These investors are then incentivized to recruit more members.
“Many of these seem obvious after the fact, but there is so much in this industry that looks and sounds legitimate,” Keen said. “Unfortunately, there are a lot of people out there in the crypto space who are just looking to take advantage of you. If you think you are a victim of a crypto-related scam, we encourage you to file a complaint with our office.”
For more information on filing a complaint, go to the DFR website.
About Oregon DFR: The Division of Financial Regulation is part of the Department of Consumer and Business Services, Oregon’s largest business regulatory and consumer protection agency. Visit dfr.oregon.gov and www.dcbs.oregon.gov.
FAQs
Whether it's fake online stores, social media romance traps or cryptocurrency fraud, it seems like online scams are everywhere these days. But what happens if you get caught orchestrating or participating in an online scam? You can be charged with wire fraud.
How can you tell a fake crypto website? ›
Besides trolling for victims on social media or messaging apps, here are 10 other telltale signs an online trading platform is a fraud:
- It isn't registered to trade forex, futures, or options.
- Trades crypto, but not registered as a money service business.
- No physical address, it's clearly fake, or offshore.
Oregon law requires companies that transfer digital currency from one person to another to be licensed as money transmitters. Digital currency exchange companies that only turn cash into digital currency are not required to be licensed.
How do I report a fake crypto platform? ›
Regulatory agencies, such as your state's consumer protection office or the Consumer Protection Bureau, are the best places to contact if you suspect you've been the victim of a scam. Always do your research to ensure the crypto software wallet, crypto exchange, or app is trustworthy before signing up for it.
How to track crypto scammer? ›
Blockchain surveillance systems can collect metadata to look out for IP addresses linked to specific payments. An IP address may shed light on the fraudster's physical location when a given transaction was made.
Can you go to jail for using crypto? ›
If the government sees evidence that you may have participated in the unlawful gain of cryptocurrency, you could be charged with theft. These are just some of the federal criminal offenses that can be charged with the use of cryptocurrency.
What are fake crypto apps? ›
Fake crypto apps use a wide range of tactics to lure users into their trap and gain access to sensitive information and funds. One common strategy scammers use is to impersonate legitimate platforms using similar names, logos, and branding to create a sense of familiarity and trust.
Can I get my money back if I got scammed from Bitcoin? ›
Cryptocurrency payments typically are not reversible. Once you pay with cryptocurrency, you can only get your money back if the person you paid sends it back. But contact the company you used to send the money and tell them it was a fraudulent transaction.
How do you know if you are being crypto scammed? ›
Promise of very high returns – Scams offer big profits from an investment. These are often unrealistic. Real-looking fake apps or companies – Fake apps and websites impersonating genuine firms, or real-looking made-up companies that try to win your trust. Both of these can be used to steal personal details or money.
What is the howey test? ›
The Court developed a landmark test for determining whether certain transactions are investment contracts known the Howey Test. Under the Howey Test, a transaction is an investment contract if: It is an investment of money. There is an expectation of profits from the investment.
Currently, at least four federal regulatory authorities are involved in managing cryptocurrency risks. This includes the Securities and Exchange Commission (SEC), the Commodity Features Trading Commission (CFTC), the Department of Justice (DoJ) and the Department of the Treasury.
Does the FTC regulate cryptocurrency? ›
"There is no comprehensive federal regulation of any type of digital assets or cryptocurrency," said V.
Can you sue a crypto scammer? ›
Participating in a Class Action Lawsuit. If you are a victim of a crypto scam, joining a class action lawsuit can help you recover some or all of your funds. A class action lawsuit pools together many victims who have suffered similar crypto losses.
Where can I report crypto theft? ›
If you think you've been interacting with a crypto scammer, and have paid them money, contact your bank and other important services and let them know. You can ask for the fraud department, which will guide you through steps to secure your finances and other information.
Do banks refund scammed money? ›
The short answer is: it depends. While getting a refund after losing money to scammers is possible, the outcome depends on factors like bank policy, the type of scam, the amount lost, and how quickly the scam was reported.
Can you go to jail for scamming people online? ›
The penalty for wire fraud can include fines, restitution, and up to 20 years in federal prison. Another federal offense available to prosecutors is computer fraud. This crime is located at 18 U.S.C. Section 1030.
Is scamming a cyber crime? ›
Cybercrime is any type of crime that involves a computer, network or online device. Online scams include any use of the internet to steal someone else's personal information.
How many years in jail for scamming? ›
The following are some possible penalties for fraud crime convictions: Less than $950 – Misdemeanor offense, six months in jail, and/or $1,000 fine. More than $950 – Misdemeanor offense, one year in jail, and/or $5,000 fine. More than $950 – Felony offense, prison term of 16 months, two years, or three years.
Can the government track crypto transactions? ›
Cryptocurrencies are traceable, with transactions recorded on a public ledger accessible to the IRS. The IRS uses advanced methods to track crypto transactions and enforce tax compliance. Centralized exchanges provide user data to the IRS.
