FTC Stories Large Leap in Cryptocurrency Scams | Cybercrime


By John P. Mello Jr.

May 19, 2021, 4:00 p.m. PT

Claims for losses from cryptocurrency fraud skyrocketed from October 2020 to March 2021, according to a report released Monday by the Federal Trade Commission.

In its Consumer Protection Data Spotlight newsletter, the FTC announced that nearly 7,000 consumers lost $ 80 million between October and March. That equates to just 570 cryptocurrency fraud reports of $ 7.5 million in losses from October 2019 to March 2020.

That equates to a more than 1,100 percent increase in cryptocurrency fraud reports over the reporting period – and a more than 900 percent increase in losses.

The agency found that the value of cryptocurrencies like Bitcoin continues to rise and new investors are ready to join the action and scammers are more than willing to take them into account.

Scammers are fitting into the cryptocurrency scene and making claims that may seem plausible given that cryptocurrency is an unfamiliar territory to many people, the agency explained.

Online people seem friendly and ready to share their “tips,” it continued. But that can also be part of the trick to get people to invest in their system.

In fact, the FTC added, some of the systems are based on referral chains – also known as Ponzi schemes – which recruit new investors in order to bring more new investors into profitability.

Get Rich Quick Allure

A number of factors appear to be driving the rise in cryptocurrency fraud.

“Scammers follow the headlines, just like you and I do, and not a day goes by without hearing about cryptocurrency,” noted Amy Nofziger, director of AARP’s Victim Support Services.

“When Elon Musk was live on Saturday night, he mentioned Dogecoin ten times,” she told the E-Commerce Times. “People hear that and stories about one-day millionaires and they want to join in.”

“Some people want to get rich quick,” added William J. Malik, vice president of infrastructure strategies for Trend Micro.

“They hear of fabulous returns for early investors in other cryptocurrencies and want to get in first,” he told the E-Commerce Times.

Cryptocurrency fraud is like other speculative scams like penny stocks, real estate, oil and gas, noted Purandar Das, CEO and co-founder of Sotero, a data protection company in Burlington, Massachusetts.

“Cryptocurrency is even more attractive as a scam because most people don’t know much about it and probably even less about how to use it,” he told the E-Commerce Times.

Rocket values

Chris Clements, vice president of solution architecture at Cerberus Sentinel, a cybersecurity consulting and penetration testing firm in Scottsdale, Arizona, claimed that by far the biggest driver behind the rise in cryptocurrency fraud is the rapid growth in the value of many cryptocurrencies.

“Without taking into account the admittedly large sell-off in the past few weeks, a single Bitcoin has risen from around $ 9,000 to $ 60,000 in the past 12 months, which is more than one [600 percent] Increase in value, “he told the E-Commerce Times.

“This has attracted a large number of new investors looking to capitalize on its rapid growth, many of whom are unfamiliar with the additional security requirements required to keep their new investments safe,” he continued.

“Unlike traditional bank or stock market investments, cryptocurrency offers few safeguards to protect unsuspecting users from exposing digital wallets or making transactions that cannot be recovered after being compromised,” he said.

“This gives scammers a combination of easy targets and lucrative payouts, so it’s no surprise that such scams are widespread,” he added.

A touch of legitimacy

Cryptocurrencies have also gained legitimacy recently. That, too, might be less discouraging to new investors.

“Cryptocurrency has gained wider adoption as apps like Square’s Cash app and others began to allow payments with Bitcoin,” said Sherrod DeGrippo, senior director of threat intelligence and detection at Proofpoint, an enterprise security company in Sunnyvale. California.

“Coinbase as a crypto trading platform recently went public and of course Elon Musk made a lot of references to various cryptocurrencies on SNL a week ago,” she continued.

“The wider adoption and accessibility means it’s a natural target for crimeware players,” she told the E-Commerce Times. “When cryptocurrency payment methods become mainstream, we will see more crime and fraud with them.”

While cryptocurrency can be relatively new for the most part, scammers continue to use proven techniques.

“They use the emotional tactics they use for any scam out there,” noted AARP’s Nofziger.

“They put you under the emotional airwaves,” she continued. “They excite you about it. They make you feel special. They make the opportunity seem legitimate.”

They will also try to collect a cryptocurrency owner’s credentials, DeGrippo added. “Proofpoint continues to see credential-collecting campaigns targeting users’ wallets and spoofing several popular cryptocurrency companies as both a sender and a landing page for credential-collecting,” she said.

Play it safe

However, cryptocurrency fraud can have some advantages for criminals over other types of fraud. “Cryptocurrency fraud crosses borders more easily than other types of online fraud,” Martha Bennett, vice president and principal analyst at Forrester, told the E-Commerce Times.

Stealing virtual money also has advantages over the real thing. “Previously, when scammers got fiat money from their victims, they had to use fake bank accounts and wash it to lose up to 50 percent of sales,” said Giacomo Arcaro, European growth hacker and CMO of Blackchain International, a consulting firm that works on blockchain – Projects helps and social media advertising in New York City.

“Now that they only get crypto, they’ve got their profit up to 100 percent and it’s more secure too,” he told the E-Commerce Times.

In its newsletter, the FTC made various recommendations to be on the safe side when investing in cryptocurrencies:

  • Promises of guaranteed high returns or claims that your cryptocurrency will be multiplied are always scams.
  • The cryptocurrency itself is the investment. You make money when you’re lucky enough to sell it for more than you paid for. Period. Don’t trust people who say they know a better way.
  • If a caller, love interest, organization or anyone else insists on cryptocurrency, you can bet it is a scam.

“While cryptocurrencies themselves are considered ‘safe’, the platforms available for purchase are not as secure,” added Thomas Beek, senior cybersecurity specialist at Digital Shadows, a San Francisco-based provider of digital risk protection solutions.

He recommended that investors take advantage of a highly reputable centralized exchange that operated for an extended period of time, such as B. Binance, Coinbase or Kucoin.

“While such services are not immune to the threat of attack,” he told the E-Commerce Times, “they are known for their ongoing efforts to scan their infrastructure for possible vulnerabilities and mitigate potential vulnerabilities – something that cannot be for Ad hoc exchanges are said to be just getting started. ”

John P. Mello Jr. has been a reporter on the ECT News Network since 2003. His focus areas are cybersecurity, IT topics, data protection, e-commerce, social media, artificial intelligence, big data and consumer electronics. He has written and edited for numerous publications, including the Boston Business Journal, the Boston Phoenix, Megapixel.Net, and Government Security News. Email to John.

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