Crypto Scams: Lucrative, Effective, and Tough to Trace
January 27, 2025
Cryptocurrency has introduced new opportunities to the world of finance, mainly as an investment vehicle, but also as a way to transact.
As with anything new in the realm of money, cryptocurrency has also attracted attention from fraudsters. While they love many of the qualities of digital currencies, they particularly value the anonymity promised by cryptocurrency.
Scammers who deal in cryptocurrency are less likely to be caught thanks to three characteristics of cryptocurrency:
- Many cryptocurrencies, such as bitcoin, operate on a pseudonymous system. This means users are identified by wallet addresses rather than personal information.
- Cryptocurrencies are global, making it tricky for law enforcement to track transactions across the world.
- The exchanges that move cryptocurrency don’t have much regulatory oversight, meaning they don’t play by the same rules as banks, which must follow strict anti-money laundering requirements.
Scammers find cryptocurrency schemes highly effective for several reasons:
- Cryptocurrencies are confusing to most people, which adds to the complexity (and therefore, efficacy) of any scam that relies on virtual dollars.
- Transactions are irreversible. Once funds are sent, they can’t be recovered unless the recipient agrees to return the money.
Cryptocurrencies are widely used in dark web marketplaces, so cashing in stolen and other versions of the virtual currency is easy for thieves.
Anyone can be pulled into a cryptocurrency scam
People often believe they are safe from cryptocurrency scams because they assume fraudsters only target tech-savvy individuals or high-profile investors, not everyday people who are less involved in digital finance.
This is a misconception. Anyone can be targeted, regardless of their involvement with cryptocurrency, as scammers are experts at hiding their schemes, often posing as law enforcement agents or financial advisors. They use phishing schemes, fake investments and digital payment platforms to disguise or downplay the crypto element.
A whopping $114 million was lost to bitcoin ATM fraud in 2023.
Because they look similar to traditional ATMs, bitcoin ATMs are a handy tool in the crypto scammer’s arsenal. There are at least five bitcoin ATMs operating in Des Moines alone.
The criminals convince their victims to deposit money into these machines to pay what they believe to be a legitimate fine, often for missing jury duty or failing to pay their full tax bill (neither of which would ever be collected by the government via an ATM deposit… but scammers are convincing).
Victims are typically instructed to enter a digital wallet address into the ATM or scan a QR code at the ATM, which links to the scammer’s wallet address. The bitcoin ATM converts the victim’s real money to cryptocurrency and then sends it to the scammer’s anonymous wallet.
How to Avoid Falling into a Cryptocurrency Trap
The FTC offers the following tips to avoid getting sucked into a cryptocurrency scam:
- Don’t believe anyone who says you need to use a bitcoin ATM to fix a problem.
- Never withdraw cash in response to an unexpected call or message.
- Verify the legitimacy of any claims or stories independently. Do not rely on contact information provided in the unexpected call or message you got.
Bank Iowa clients are encouraged to call us anytime at 1-844-226-5421 if they suspect they are being drawn into a scam. Don’t be afraid to hang up or disconnect from so-called agents or advisors. If they are legitimate, they will welcome your outreach to reconnect through official channels.