Expect to Lose $3 Billion Due to Crypto Scams
Consumers may lose up to $3 billion by the end of the year because of cryptocurrency-related scams, the US Federal Trade Commission reported recently.
“Consumers will lose more than $3 billion by the end of 2018,” Andrew Smith, director of the FTC’s Bureau of Consumer Protection, told attendees of an event highlighting cryptocurrency scams and fraud.
The US watchdog said consumers lost $532 million to cryptocurrency-linked illicit activities in the first two months of 2018. Lack of concern on the part of investors is one of the factors seen for the rise in figures. This was emphasized by Joe Rotunda, enforcement director for the Texas State Securities Board.
People got entangled into fraud such as exit scams to pump-and-dump schemes because they are seeking to realize higher earnings on their investment, according to Peter Van Valkenburgh, research director of Coin Center.
“I think nobody should ever buy any more cryptocurrency, put anymore [into] cryptocurrency than what they are completely willing to lose … if you are willing to participate at all. That is a message that needs to be repeated and repeated,” Van Valkenburgh added.
There is a need for regulators “to be proactive in any type of new market, especially this type. We didn’t have the public being pitched different types of investments like this on the scale a year ago. This is something that blew up late last year,” Rotunda said.
“Regulators need to number one, identify companies that are trying to do it right and work with [them],” he remarked. “The companies that are trying to do it right [should] get a telephone call from the regulator, not a cease-and-desist order, right? Not a lawsuit. We can usually work with them … [and] we need to identify the fraudulent schemes and we need to act quickly and stop them,” he added.
The aforementioned event saw calls for measures to self-regulation, a concept which has been considered an advancement from both public and private sources over the last few months. But all sectors recognized investors should do their due diligence.
“If you yourself are not capable of explaining to somebody what a token’s supposed to do, you should not buy the token. If you can’t tell the wheat from the chaff, or what is techno-gibberish or actual innovation, you should not participate,” Van Valkenburgh said.
Earlier, the FTC said it would be hosting a workshop entitled “Decrypting Cryptocurrency Scams” that would feature stakeholders from law enforcement, consumer advocacy groups and private-sector businesses in order to “to explore how scammers are exploiting public interest in cryptocurrencies such as bitcoin and litecoin and to discuss ways to empower and protect consumers.”
“Reported scams include deceptive investment and business opportunities, bait-and-switch schemes, and deceptively marketed mining machines. The FTC has continued its efforts to educate consumers about cryptocurrencies and hold fraudsters accountable,” the FTC had said.
“This case shows that scammers always find new ways to market old schemes, which is why the FTC will remain vigilant regardless of the platform – or currency used,” Tom Pahl, acting director of the FTC Bureau of Consumer Protection, said at the time.