A 75% Rise in Crypto Scams Forecast for 2021: How to Stay Safe

Bitcoin and other cryptocurrencies are becoming more popular, but crypto scams are also growing at a fast pace. The high-profile $1.5 billion bitcoin purchase by Tesla CEO Elon Musk not only made headlines, but it moved the bitcoin market and increased the buzz about digital currencies. However, the number of cryptocurrency scams has also increased 40% since 2019, and according to the findings of a Bolster report, is excepted to rise 75% in 2021. 

Consumers are faced with the dilemma of how to benefit from the rising popularity of cryptocurrency and get ahead of a trend while staying safe from ruinous and crypto scams. 

The Trader Defense Advisory team is comprised of professionals who have vast experience helping consumers avoid and recover from a variety of scams, including crypto scams. We consult with clients and can offer a variety of avenues for fund recovery, including intelligence reports, advocacy, chargebacks, and wire recall. We deal with crypto scams as well as reporting fraudulent brokers and can help your case succeed. 

How Quickly Are Crypto Scams Increasing? 

Crypto scams began as soon as bitcoin premiered in 2009. Although many regulators around the world took steps to raise awareness about cryptocurrency fraud and to activate law enforcement, those who perpetrate crypto scams, like hackers, continuously upgrade their tools and techniques. 

As bitcoin is increasingly offered as a payment option on many websites and new types of cryptocurrency are developed, fraudulent crypto offerings, investments, and products are also appearing. There were over 400,000 crypto scams created in 2020 alone and the number is expected to rise. 

According to a Bolster Report, which surveyed 300 million websites to see which were either affected or used in crypto scams, the number of fraudulent cryptocurrency schemes is expected to increase by 75% in 2021. Another sobering fact is that Investopedia has found that 80% of ICO or Initial Coin Offerings are scams. 

Why Are There So Many Crypto Scams? 

There are several reasons for a large number of crypto scams. First, anything new and hot will attract unscrupulous parties who want to benefit from the trend. As soon as a type of shoe becomes all the rage, it isn’t uncommon to see people selling knock-off brands on the street, like the people who sell fake Gucci handbags or knock-off switch watches. S

Since marketing began, for every good idea or invention, there have been people ready to provide a fake version. It stands to reason that as digital currencies become more popular, there are bound to be more bitcoin scams and other types of cryptocurrency fraud. 

The second factor is the anonymity provided by digital currency. Although transactions are tracked on the blockchain, the people making the purchases are often not traced or identified clearly. This can provide an opportunity for cybercriminals to abscond with ill-gotten gains and launder money. 

Third, many new products, including digital currency, involve elevated expectations combined with a lack of specific knowledge. People are excited about the new financial horizons provided by cryptocurrency. They may be fooled by overly rosy language and extravagant promises from crypto scammers. 

Since it can be a challenge to understand how bitcoin and other cryptocurrencies work at first, scammers use this lack of knowledge and clients’ hope as a way to fool them out of their funds. 

The fourth factor is desperation. The Covid-19 crisis left many people out of work or under-earning. People are desperate for a way to make more money and maybe more easily duped by crypto scams than they would under ordinary circumstances. 

In addition, the pandemic has given people more time to sit in front of the computer look at get rich quick schemes online. This has created a larger market for scams. 

How Can I Stay Safe from Crypto Scams?

Learning to be skeptical and recognize prospective crypto scams is a huge step towards staying safe. The old adage, “if it is too good to be true, it probably is,” is good to keep in mind before signing up for any kind of bitcoin trading scheme or crypto product. It is always important to remember the following: 

  • Always ask questions and never trust any service completely
  • Find out the background of the broker or the company offering bitcoin products
  • Do not give your bitcoin information anyway to anyone
  • If you are investing in an ICO, only use trusted platforms
  • Validate the reliability of all websites and companies before purchasing crypto wallets or apps.

Of course, cryptocurrency is new and you can’t expect a broker or a company to have decades of experience in an industry that didn’t exist before 2009, but every crypto product, brokerage, or company has what they call in the financial industry, “bloodlines.” These refer to the experience of the people behind the operation. Every investor should research carefully who is in charge, what their experience is, what activities they have been involved in in the past. 

Do not be quick to give away your data, click on links or offer private crypto information. Many crypto scams are a front for identity theft. Losing the bitcoin in your digital wallet is bad enough, but when they gain access to your data, your financial health could be threatened. 

Follow your gut feeling if you do not feel a crypto service is reliable, and when in doubt, stay away. Ask questions and if something happens, make a complaint and seek the guidance of Trader Defense Advisory.

About Trader Defense Advisory

Trader Defense Advisory professionals are well-versed in the process of reporting fraudulent brokers, crypto scams and identity theft. They help clients individually through the procedure of filing a claim and reporting their case to the authorities. TDA experts have combined decades of experience with banks and financial regulators that can track down the fraudulent parties and help clients recover from identity theft and other types of fraud. We have a proven track record of success in assisting clients with winning claims and helping clients reclaim their identity.


Why Forex Scams Are Still a Major Threat Despite Regulations

Forex is the largest financial market in the world, trading over $6.6 trillion per day. The overwhelming size of the foreign exchange market has resulted in more forex fraud. Forex scams since COVID-19 began have grown at a more rapid pace than before. This is true despite governments stepping up regulations.

Why didn’t forex regulations governments have adopted in the past few years prevent the proliferation of forex scams?

Forex Scams–The Epidemic Within the Pandemic

It is natural for scam artists to take advantage of both positive and negative events. This was particularly true of forex scams during the Covid-19 crisis. The increase year over year of cyber scams ranged from 70% to 90% depending on the type of scam. 

One factor for this increase was the amount of time people spent online. Since many people were unemployed or working from home, they had more time to spend online and were easy targets for all kinds of cyber scams. 

The other factor was a deep financial need. Unemployment and economic decline in many countries reached levels that had not been seen in decades. As people waited for stimulus checks from the government, they were searching online for ways to make money fast. 

Forex scam artists took advantage of this desperation and offered money-making schemes that actually turned out to be money-taking scams. 

One infamous example was a scammer named Kenzley Ramos from Georgia who promised they would make large amounts of money during the coronavirus pandemic trading forex. Ramos promised huge returns to investors who entrusted their money to him and his forex trades. However, Ramos did not trade any of the money but pocketed it. Ramos surrendered to authorities and was charged with commodities fraud. 

This example is only one of many forex scams that proliferated since the beginning of COVID-19 and even as restrictions are relaxed and life returns to normal, forex scams are expected to increase as long as people are looking to regain their losses and make extra money. 

Governments and financial regulators warn the public against these get-rich-quick schemes and have regulations in place. So why then have forex scams increased? Aren’t regulations working? 

Government Regulation of the Forex Market–Are They Working? 

If there are many forex scams, it would seem logical that governments should tightly regulate the forex market. Although the United Sates, Europe, and other areas of the world have regulatory bodies that are intended to oversee brokers and other forex services, there is still plenty of fraud. This seems counterintuitive but it makes sense looking carefully at the nature of the forex market. 

Unlike stocks, forex is not traded on a central exchange that can be easily regulated. Therefore, the government can try to create rules for forex trading, but these rules may not have the kind of a bite and practical application as laws against speeding, for example. If the speed limit changes in a certain place, the police can clock someone speeding, prove it and issue them with a ticket. 

However, forex is not traded on a specific “highway” or an exchange. There is a “police officer” who is given the authority to patrol a certain area and execute laws. The most that can be done about forex trading is to set up regulatory bodies that can create rules for forex trading and products, can license brokers, take action against brokers who violate the rules by suspending licenses, and alerting legal authorities to fraud and other crimes they investigate. 

There are many regulatory agencies in countries all over the world that are given the authority to make rules that protect consumers and can take action against fraudulent behavior when it happens. Some of these organizations are the FCA or the Financial Conduct Authority in the U.K., National Futures Association (NFA) in the U.S., and the MiFiD or Markets in Financial Instruments Directive, which governs the EU. In addition to the MiFID, there are regulatory bodies located in individual European countries. 

Examples of rules these regulators require of forex services and brokers include:

  • Conforming to the precise definition of individual and institutional investor
  • Maximum rates of leverage
  • Requiring separate accounts of the companies and clients
  • Mandating minimum market capitalization
  • Client compensation in case of company or broker insolvency 
  • Require record keeping, reporting, and inspection
  • Security deposit requirements
  • Negative balance protection

These are just a few of the regulations these organizations may require from companies and brokers registered with them. The list of requirements should be more than sufficient for protecting consumers against frauds and ensure they will recover their funds in case the company or broker suffers a financial crisis.

If These Regulators Are So Effective, Why Are There So Many Forex Scams?

Returning to the original question, simply put, there are so many forex scams, despite thorough regulation because forex is not something that can be centrally located, since it is not connected to a specific exchange and because many brokers and forex services avoid or can’t qualify to become licensed. Therefore, they are not under the authority of these regulators. 

Technically, it isn’t legal for these brokers and companies not to get a license to trade forex. However, as long as consumers do not do their due diligence or are unaware that licenses are important, the more these forex scams will thrive. 

The bottom line is, the regulators can only do their part, but if the consumer remains indifferent or uninformed about how essential working with a licensed forex broker or a legitimate forex company is, the regulators are not able to protect them from scams. 

Trader Defense Advisory works with many clients who entrusted their money with an unregulated broker. The results are almost never good. We strongly advise consumers to research forex brokers thoroughly by reading our broker reviews and asking our experts questions they may have about forex brokers. If you have lost money in a forex scam, consult with us and we can create a fund recovery strategy. 

If You Have Been the Target of a Forex Scam, Talk to Trader Defense Advisory. 

Trader Defense Advisory professionals are well-versed in the process of reporting fraudulent brokers, forex scams, and identity theft. They help clients individually through the procedure of filing a claim and reporting their case to the authorities. TDA experts have combined decades of experience with banks and financial regulators that can track down fraudulent parties and help clients recover from identity theft and other types of fraud. We have a proven track record of success in assisting clients with winning claims and helping clients reclaim their identity.


Despite Chinese Government Crackdown, Crypto Scams Continue

China has led the way in technological advances but is also known for cracking down on these same technologies when the Chinese government perceives development has gotten out of hand. This sometimes contradictory approach is seen in China’s shifting position on cryptocurrency. 

The Chinese government, on the one hand, was initially supportive of the development of blockchain technology, but it took some of the most aggressive steps in the world to regulate cryptocurrency. However, despite the strict laws limiting cryptocurrencies in China in 2017,  crypto scams originating in China are finding ways of operating, in some cases offshore. 

One example is the Chinese-led crypto scam Turkish officials discovered in March 2021. Law enforcement arrested the 18 ringleaders who, as reported by the Turkish-language news agency Demirörenon, had taken 101 people captive and forced them to operate the scam. The captives, all Chinese nationals, were forced to get Turkish visas, which were taken away from them so they could not go back to China. 

The prisoners were paid a salary of $1,000 a month, were compelled to work long hours and lived in nine villas in the Turkish coastal city of Silivri. These criminal activities were discovered when two of the workers escaped and immediately sought the aid of authorities. 

The scam pretended to be a company that would manage cryptocurrencies for clients and provide customer support. They depended on consumers giving them cryptocurrencies or data which they would steal and use for their own purposes. The fake service urged customers to “hand over your virtual currency to us and we will double it and give it back to you.” 

This shocking case is just one in a series of cases that demonstrate, rather than preventing cyber criminals from perpetrating crypto scams, the Chinese government’s tight regulations have driven these frauds offshore. A similar type of scam involves Chinese nationals selling fake cryptocurrency products on social media and gaining access to digital currency and data when people clicked on scam links. 

The Chinese Regulation of Cryptocurrency

The Chinese government has a complex relationship with cryptocurrency. While it is true some of China’s technology contributed to the development of blockchain technology and it was once a major buyer of bitcoin, its government, which is known for being strict regarding regulations, clamped down on cryptocurrencies and outlawed ICOs or Initial Coin Offerings in 2017 and shut down cryptocurrency exchanges in China. 

Recently, it seems that China has relaxed its stance on digital currencies somewhat. Li Bo, the Deputy Governor of The People’s Bank of China declared that bitcoin was an “investment alternative.” Although Li Bo did not encourage bitcoin as a form of currency, he did indicate a more open attitude to cryptocurrency trading. 

Bo’s statement sent mixed signals about the future of cryptocurrency in China. Although he maintained that the central bank will retain its regulations on cryptocurrencies, he hinted that China was “still looking into” what kind of regulations to impose, “maybe minimal.” He reaffirmed The People’s Bank of China’s concern about speculation and creating financial risks with cryptocurrency trading. There is talk that China will introduce a digital yuan in 2022. 

The Dilemma of Cryptocurrency 

China’s ever-changing position on cryptocurrency reflects the feelings of many governments and individuals regarding on the one hand wanting to take advantage of a significant opportunity and concern over risks, volatility, and crypto scams. 

The Chinese government, by taking steps towards introducing a digital version of the yuan and relaxing regulations on cryptocurrency, is showing it wants to participate in the digital currency trend, but there is a concern that the kind of crypto scams that went offshore, such as the fraud described in Turkey, will return to mainland China. 

The attraction of cryptocurrency is that it provides freedom from government regulation, which is something many governments, especially the Chinese government, may find threatening. 

There are proposals around the world to attempt to regulate the cryptocurrency market, but since no government has control over the blockchain, there is little they can do to prevent problems from arising. They must resort to having law enforcement crack down on scams after they are discovered because they are not in a strong position to prevent crypto scams. 

How To Avoid Crypto Scams

Since it is clear that even when governments intend to crack down on crypto scams, their lack of control over the blockchain and crypto technology means there is little they can do in reality to prevent these types of crime. This means that consumers need to take the responsibility to do their due diligence and educate themselves about crypto scams and take steps to avoid them. 

Trader Defense Advisory recommends taking the following steps to avoid becoming a victim of crypto scams: 

  1. Avoid “deals”’ involving cryptocurrency with extravagant claims about becoming rich 
  2. Do not hand over your bitcoin or codes to anyone
  3. Be suspicious of spam or unsolicited messages from people you don’t know with a cryptocurrency scheme
  4. Verify all cryptocurrency services and brokers by conducting a background check. Confirm all  contact information, company history and licenses
  5. Do not click on links that are sent to you by parties you are not already in regular contact with. If you are invited to visit a site and want to check it out, type the address manually in your browser
  6. Keep in mind that cryptocurrency is volatile and the market moves quickly. Reject any offer from a broker who claims to “guarantee” consistent high returns on your investment. 

As those who create crypto scams become more creative in their strategies, there is no guarantee that even with these precautions you will be 100% safe from fraud, but they will dramatically reduce your chances of losing money and data to a crypto scam. 

If You Have Been the Target of a Crypto Scam, Talk to Trader Defense Advisory. 

Trader Defense Advisory professionals are well-versed in the process of reporting fraudulent brokers, crypto scams, and identity theft. They help clients individually through the procedure of filing a claim and reporting their case to the authorities. TDA experts have combined decades of experience with banks and financial regulators that can track down fraudulent parties and help clients recover from identity theft and other types of fraud. We have a proven track record of success in assisting clients with winning claims and helping clients reclaim their identity.