Why Bitcoin, Crypto Rip-Offs Are Soaring

Why Bitcoin, Crypto Rip-Offs Are Soaring

The odd thing about cryptocurrencies is that unlike gold or other valuables you can’t store them in a physical safety deposit box in a bank vault. Since they are virtual, they sit in computer memory.

That doesn’t mean that cryptos are inherently prone to theft. It’s a matter of where they are stored, which are often on digital currency exchanges that can be hacked.

According to a recent report by CipherTrace, rip-offs from cryptocurrency exchanges “soared in the first half of this year to three times the level seen for the whole of 2017.”

The report says that the digital money was likely stolen for money laundering purposes.

In the first six months of the year, a total of $761 million was stolen from digital currency exchanges, compared with about $266 million for the whole of 2017, The losses could rise to 1.5 billion this year.

How do criminals use cryptos in their capers? They can use cryptos to hide their identity and launder money from ill-gotten gains. Since cryptos don’t have serial numbers like paper currency, they are difficult to trace.

It’s long been speculated that cryptos are used by criminals around the world to mask their crimes. Why carry around a truck full of currency when you all you need is a computer?

International police organizations are also slow to catch up with the crypto-crime trend. There is no standard regulation of cryptos, although government agencies like the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission (CFTC) are considering regulation.

Avoid crypto rip-offs

How can you protect yourself from theft? Here are some safeguards from the CFTC:

  • If someone tries to sell you an investment in options or futures on virtual currencies, including Bitcoin, verify they are registered with the CFTC. Visit SmartCheck.gov to check registrations or learn more about common investment frauds.
  • Remember — much of the virtual currency cash market operates through Internet-based trading platforms that may be unregulated and unsupervised.
  • Do not invest in products or strategies you do not understand. Only speculate with money you can afford to lose.
  • There is no such thing as a guaranteed investment or trading strategy. If someone tells you there is no risk of losing money, do not invest.
  • Investors should conduct extensive research into the legitimacy of virtual currency platforms and digital wallets before providing credit card information, wiring money, or offering sensitive personal information.
  • The SEC has also warned that some token sales or initial coin offerings (ICOs) can be used to improperly entice investors with promises of high returns.

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