Attorney General Kwame Raoul on Wednesday encouraged Illinoisans to learn more before using or investing in cryptocurrency to avoid being ripped off by cryptocurrency scams.
Cryptocurrency is a type of digital currency purchased using a computer or smart device. There are many different cryptocurrencies that can be bought, sold, and traded on cryptocurrency “exchanges”; used to purchase goods and services; or held as investments. However, cryptocurrencies can be risky because they can be lost or stolen, and prices are more unpredictable than traditional assets, Raoul says in a press release.
Unlike traditional money, assets, or stocks, cryptocurrencies and cryptocurrency exchanges are not significantly regulated by any government, central bank, or organized exchange. Without meaningful oversight, it is easier for fraud to occur and more difficult to reverse fraudulent transactions. More importantly, there is no guarantee that lost or stolen cryptocurrencies will be returned.
“Recent high-profile scams involving cryptocurrency highlight the need for consumers to be very vigilant when dealing with anyone claiming to sell or provide information related to the volatile world of cryptocurrency,” Raoul said. “The unregulated cryptocurrency market has provided countless examples of massive investment gains and losses, fueling high-profile advertising and an associated rise in scammers seeking to take advantage of consumers.”
The Attorney General’s office is aware of reports that scammers have contacted people posing as cryptocurrency investors promising significant investment returns or offering cryptocurrency investment advice. These scammers either ask to send money directly to them or refer people to a website or app that looks authentic but is controlled by the scammer. People may receive information indicating that they have seen a return on their investment, but these statements and websites are often false, the statement said.
Instead, the scammers have often already taken the investor’s money and disappeared. In some cases, scammers may claim that investors must pay fees, taxes, or verify their account in order to receive their profits. At this point, the scammers have already taken the investors’ money and are attempting to extract additional funds.
Raoul issued the following recommendations to help people avoid losing money to cryptocurrency scams:
- Understand the basics of cryptocurrency before investing. Scammers know that cryptocurrencies are new and complex and many people won’t ask for details. Do not invest with anyone who cannot explain the details of the investment in plain language or who claims that they want to exploit a certain aspect of the cryptocurrency market, or that their investment carries little or no risk.
- Never invest money that you cannot afford to lose. The cryptocurrency has one of the highest volatility, or fluctuating prices, on the market. Investments can plummet based on a single event or on a single day.
- Be on the lookout for cryptocurrency opportunities that encourage you to recruit other investors. Returns along with incentives based on the number of people you add to the network or company can be the sign of an illegal pyramid scheme. Although you may initially receive comparatively small profits, all the money actually goes to the investors at the top. As with pyramid schemes, investors below will be left with nothing if, for example, a cryptocurrency turns out to be fraudulent.
- Be wary of anyone you don’t know asking you to buy or send cryptocurrency for a specific purpose. Many cryptocurrency scams are similar to scams involving gift cards, wire fraud, and other currencies. Becoming familiar with common scams, such as government phishing or romance scams, can thwart a scammer’s attempts to steal your money. Additional information on scams is available on the Attorney General’s website.
- Do not invest with anyone who offers guaranteed or suspiciously high rates of return. Return guarantees with high percentages and promises that your initial investment will double or triple can be the hallmarks of a Ponzi scheme. Investments, especially those seeking high returns, fluctuate over time due to changing market conditions.
- Remember, most unsolicited messages about investment opportunities are scams. Scammers can easily contact you through text messages, calls, emails, or through direct messaging apps or social media. Be suspicious of any unsolicited communication that asks you to invest in a cryptocurrency opportunity, offers to help you earn money in cryptocurrency, or requests your financial information. Legitimate entities like the Internal Revenue Service, US Postal Service, or state government agencies will not contact you via text message.
- Do not invest in cryptocurrency just because it was endorsed by a celebrity. Recently, several celebrities allegedly violated securities laws related to their crypto endorsements. Remember that celebrities, and even big-name news stations and news websites, are often paid to endorse products.
- Do your homework before investing in any cryptocurrency. Recently, scammers have been creating fake exchanges, investment platforms, or cryptocurrency mining or staking services. Consumers who thought they were investing in the next big thing were actually sending their cryptocurrency directly to a scammer. A dedicated scammer may even create fake social media profiles or websites promoting the reputation and success of their new platform or investment opportunity.
- Protect your privacy online when accessing cryptocurrency. Use a secure network and never share your password or digital wallet key. Consider using a virtual private network when accessing and exchanging cryptocurrency.
Raoul encourages consumers who believe they have been the victim of a cryptocurrency scam to report the scam by visiting the Attorney General’s website or by calling Raoul’s consumer fraud hotlines:
1-800-386-5438 (Chicago)
1-866-310-8398 (English)
1-800-243-0618 (Springfield)
1-800-243-0607 (Carbondale)
