Paying with cryptocurrency
- If you're thinking about paying with cryptocurrency, know that it's different from paying with a credit card or other traditional payment methods.
- Cryptocurrency payments do not come with legal protections. Credit cards and debit cards have legal protections if something goes wrong. For example, if you need to dispute a purchase, your credit card company has a process to help you get your money back. Cryptocurrencies typically do not.
- Cryptocurrency payments typically are not reversible. Once you pay with cryptocurrency, you can usually only get your money back if the person you paid sends it back. Before you buy something with cryptocurrency, know the seller's reputation, where the seller is located, and how to contact someone if there is a problem. Confirm these details by doing some research before you pay.
- Some information about your transactions will likely be public. People talk about cryptocurrency transactions as anonymous. But the truth is not that simple. Some cryptocurrencies record some transaction details on a public ledger, called a "blockchain." That's a public list of every cryptocurrency transaction — both the payment and receipt sides. Depending on the cryptocurrency, the information added to the blockchain can include details like the transaction amount and the sender's and recipient's wallet addresses. A wallet address is a long string of numbers and letters linked to your digital wallet. Even though you can use a fake name to register your digital wallet, it's possible to use transaction and wallet information to identify the people involved in a specific transaction. And when you buy something from a seller who collects other information about you, like a shipping address, that information can be used to identify you later on.
How to avoid cryptocurrency scams
One sure sign of a scam is anyone who says you have to pay by cryptocurrency. In fact, anyone who tells you to pay by wire transfer, gift card, or cryptocurrency is a scammer. Of course, if you pay, there's almost no way to get that money back.
Cryptocurrency investment tactics to watch out for:
- Promises that you can earn lots of money in a short time and achieve financial freedom. If they promise you'll make a profit, that's a scam. Even if there's a celebrity endorsement or testimonials. Nobody can guarantee a set return, say, double your money. Much less in a short time.
- Having to pay in cryptocurrency for the right to recruit others into a program. If you do, they say, you'll get recruitment rewards paid in cryptocurrency. The more cryptocurrency you pay, the more money they promise you'll make. But these are all fake promises, and false guarantees.
- Unsolicited offers from supposed "investment managers." These scammers say they can help you grow your money if you give them the cryptocurrency you've bought. But once you log in to the "investment account" they opened, you'll find that you can't withdraw your money unless you pay fees.
- Unsolicited job offers to help recruit cryptocurrency investors, sell cryptocurrency, mine cryptocurrency, or help with converting cash to bitcoin.
- A promise free of money. They'll promise it in cash or cryptocurrency, but free money promises are always fake.
- Big claims without details or explanations. Smart business people want to understand how their investment works, and where their money is going. And good investment advisors want to share that information.
Other scams to avoid
- Blackmail emails - Scammers will often send emails that say they have embarrassing or compromising photos, videos, or personal information about you. Then, they threaten to make it public unless you pay them in cryptocurrency. Don't do it. This is blackmail and a criminal extortion attempt. Report it to the FBI immediately.
- Social media scams - If you read a tweet, text, email, or get a message on social media that tells you to send cryptocurrency, it's a scam. That's true even if the message came from someone you know, or was posted by a celebrity you follow. Their social media accounts might have been hacked.
- 'Pig Butchering' Crypto Scam:
- The scammer targets a victim on a dating app like Tinder, initiating a romantic relationship that’s exclusively online.
- Through online chats, a level of trust is established.
- Inevitably, the “lover” encourages their target to invest in cryptocurrency, commonly directing them to a fake website or app that is secretly controlled by the scammer.
- After the victim has agreed to invest some money in the phony platform, the lover disappears (along with the money) - never to be seen again.
- Once the victim starts getting skeptical or tries to withdraw their funds, they are often told that they have to pay tax on the gains before funds can be unlocked.