What to Know About Cryptocurrency Scams

In 2023, a federal grand jury in Oregon indicted the founders of an investment platform that raised $340 million from investors around the world. According to the Justice Department, the platform’s software was set up so as soon as an investor purchased a slot in a smart contract, the money was diverted to the accounts of earlier investors.

Phony investment managers. You may be contacted out of the blue by someone claiming to be an investment manager, who will promise to grow your money — but only if you buy cryptocurrency. They’ll guide you to an investment website that looks real but is a clever fake. When you try to withdraw some of your earnings, you can’t, or you’ll be told you first need to pay high fees. 

Scammers sometimes advertise individual retirement accounts as IRS-approved to make them seem like a less risky investment. Some self-directed IRAs do allow investment in virtual currencies, but the Internal Revenue Service does not approve or review these investments.

Celebrity impersonations. Scammers impersonate celebrities, contacting fans through social media to offer a chance to make a killing on a cryptocurrency investment. They’ll ask you to send cryptocurrency to them by clicking on a link or using a QR code that supposedly belongs to the celebrity. In reality, your cryptocurrency goes straight to the scammer, and you’re not going to see it again.

Financial grooming/romance scams. “I’m convinced that these crypto romance frauds are the most common fraud in the world right now, and they’re really, really a problem,” says Steve Baker, a former FTC official who publishes the Baker Fraud Report newsletter. 

Baker says crypto-related romance scams are so lucrative that organized crime organizations kidnap people to work in call centers in places such as Cambodia and Myanmar. The captive workers are forced to entice investors on the other side of the world with fake promises of romance, in an effort to lure them into crooked investment schemes. (For more on these prison-like scam call centers, listen to this episode of the AARP podcast The Perfect Scam.)

Cryptocurrency payment scams

In this category, scammers who are running some fraud or another will pressure you to pay them in cryptocurrency, something no legitimate business or government agency would do.

For criminals, cryptocurrency has the advantage of being difficult to trace, without the same legal protections as credit or debit cards, and payments usually can’t be reversed, according to the FTC’s website.

“Do not invest in crypto with someone that sends you a text message, reaches out to you on social media or finds you online somewhere,” says Amy Nofziger, director of fraud victim support with AARP. “And if someone says that you owe a fee or payment and they [tell you to] directly go [to a] crypto ATM machine, certainly it’s a scam.”

Red flags

• Claims that you’ll make big money. Someone you don’t know sends you a message out of the blue about an incredibly lucrative virtual currency investment opportunity involving no risk and surefire profits.
• Pressure to pay. A call, text, email or social media message claiming to be from a government agency, utility or other official body seeks a crypto payment to cover a bill, debt or fee.

How to protect yourself

• Understand the risk. The virtual currency trade is speculative and volatile. As the FTC notes, “An investment that may be worth thousands of dollars on Tuesday could only be worth hundreds on Wednesday.”
• Resist pressure to buy right now. Criminals often try to create a false sense of urgency around a supposedly red-hot cryptocurrency.
• Check out any dealer in virtual currency options or futures contracts before you buy. The U.S. Commodity Futures Trading Commission (CFTC) has a tool for running an online background check. It’s not a good idea to invest in or trade virtual currencies on the advice of someone you’ve only dealt with online, whether it’s an anonymous tipster on social media or a supposed romantic partner.
• Do your research. Thoroughly research any virtual currency platform or digital wallet provider before providing any credit card information, wiring money or disclosing sensitive personal data.
• Carefully read any agreement with a digital wallet provider. They likely will not accept responsibility for replacing your money if it is stolen, the Consumer Financial Protection Bureau warns. Note: Banks don't accept responsibility for replacing your money if you were somehow connected to the theft through manipulation.
• If you own crypto, never share your “private keys” — the long letter-and-number codes that enable you to access your virtual currency — with anyone. Keep them in a secure place.

What to do if you’ve been targeted

• Submit a report to the FBI Internet Crime Complaint Center (IC3) or contact your local FBI Field Office and provide as much information about the transaction as possible.
• Report it to your local police. If they resist taking your report, persist so you have a record of the loss.
• File a report through the FTC’s online form at ReportFraud.ftc.gov.

More resources

To learn more, check out the FTC’s page on cryptocurrency scams. Additionally, listen to this episode of the AARP podcast The Perfect Scam..