Cryptocurrency Trading Risks

MyChargeBack understands cryptocurrency trading risks and offers proven strategies for tracing your crypto’s path through the blockchain to uncover the identity of the party who cashed it out.

What Are the Risks of Investing in Cryptocurrency?

The entire virtual currency market reached a capitalization of nearly $2 trillion dollars in just 12 years. By the end of 2017, the price of a single bitcoin was $13,889.99.  It is no coincidence that just a few weeks later the U.S. Commodity Futures Trading Commission (CFTC) filed the first three lawsuits against cryptocurrency scamsThe suit accused the individuals who ran them of fraud, misrepresentation and misappropriation of bitcoin.

Is cryptocurrency high-risk? Yes, it can be. Criminals eye digital currency because it promises instant profit. Law enforcement authorities in every major country are constantly on the alert for cryptocurrency crimes in general and bitcoin crimes in particular. They are the most dangerous cryptocurrency trading risks. That is especially true since February 16, 2021, when the cost of one bitcoin reached $50,000 for the first time. In the second quarter of 2021 the U.S. Federal Trade Commission (FTC) estimated that approximately 14% of losses to imposters of all types were being paid in cryptocurrency.

How much do victims of cryptocurrency crimes lose? According to the FTC, 7,000 Americans reported losing the equivalent of more than $80 million to crypto crime between October 2020 and April 2021. Shockingly, that figure is more than 12 times the total during the same six-month period the year before. 

Cryptocurrency Criminals Are Inventive

Every cryptocurrency crime is inventive. The criminals who are behind them never cease to come up with a new way to steal your coins. Is bitcoin a high-risk investment? Consider this: One report claimed that during the COVID-19 pandemic bitcoin crimes involving extortion shot up by 1,300% in one month alone. Most of these bitcoin crimes involved sextortion

Quite literally, crypto criminals think of everything. Want to commit suicide? There are Facebook pages advertising poison pills you can order by paying in bitcoin. Apart from the brashness and ghoulishness of it, the pills are fake. The bitcoin crime wasn’t. It was real. And the bitcoin that was paid (and lost) was also real.

Since 2015, moreover, cryptocurrency has become the payment of choice for kidnappers. Since then, bitcoin ransom has been demanded by kidnappers in at least 12 countries as the price for freeing their hostages.   

What are the most common cryptocurrency trading risks? How does a cryptocurrency crime work? What are the risks involve din investing in bitcoin? Most victims report falling for one of the six types of crypto crimes below.

Pump and Dump Schemes

This is a veteran crime perfected by Jordan Belfort and popularized in the movie The Wolf of Wall Street. Scammers “pump up” or promote an “altcoin” they own in bulk and then sell it off in bulk once the price peaks. Of course, they were the ones who peaked the price in the first place by artificially increasing demand. What made Pump and Dump especially viable for crypto criminals and especially dangerous for crypto investors was the glut in under-sold bitcoin alternatives (there were 45 of them by the end of 2017). By the way, speaking from his own experience, Belfort called cryptocurrencies “a wolf in sheep’s clothing.” He added that initial coin offerings (ICOs), the gateways for new cryptocurrencies, were “the biggest scams ever.”

Investment Clubs

They may be popular, but the only ones who profit from online crypto “clubs” are the criminals who run them. Their sites certainly look legitimate. They’re sure to feature photos of satisfied members who claim they made megabucks by trusting the hidden cryptocurrency pros who stand behind the curtain. But the last time you see your assets will be when you hand them over to them.

One example of an investment club based on cryptocurrency was Eastern Metal Securities (EMS), which operated from 2012 through 2019. Its investors were told that their shares, which they purchased in bitcoin and Ethereum, would eventually yield a return equivalent to 1.15 kilograms of gold. The owner of EMS, Roger Nils-Jonas Karlsson, who was referred to in the press as a “Swedish crypto gangster,” pleaded guilty to securities fraud, wire fraud and money laundering in a U.S. court 2021. He was sentenced to 15 years in prison and fined $16,263,820, which is roughly the sum investigators claimed he stole from investors, who will be compensated for their loses.

Fake Exchanges

Fake cryptocurrency exchanges are easy to find.  They’re all over cyberspace. They’re especially dangerous for first-time investors, who will find it hard, if not impossible, to distinguish fake exchanges from legitimate ones. In December 2017, Korean authorities closed down one of them, BitKRX. What was particularly pernicious was that BitKRX usurped the last three letters of its name from KRX, the Korean Stock Exchange. It purposely misrepresented itself in order to provide itself with a veneer of legitimacy. A fake exchange is a very useful front for bitcoin crime. 

Fake Wallets

No crime fits cryptocurrencies as well as fake wallets do. “Altcoins” are bytes of data, rather than metal. Therefore, owners have to park them somewhere online in a “digital wallet.” Innovative criminals with good marketing skills set up their own digital wallets. They then aggressively advertise for customers to come along and park their digital currency. Once they do so, their cryptocurrency disappears forever. And the operators of the fake digital wallet fade into the digital sunset. Another ideal venue for bitcoin crime.

Social Media Crypto Crimes

Bill Gates, Jeff Bezos, Elon Musk, and Warren Buffett. Kanye West and Kim Kardashian, rapper Wiz Khalifa and YouTuber MrBeast. Barack Obama, Joe Biden and Mike Bloomberg. Apple, Wendy’s, Uber, and CashApp. What do they all have in common? 

The short answer is influence. The full answer is that they are all on Twitter, they have gazillions of followers and, on July 15, 2020, hackers hijacked their Twitter accounts. Same with bitcoin and Ripple, online cryptocurrency news site Coindesk and the cryptocurrency exchange Binance. Cyber criminals targeted their Twitter accounts in what may very well be the most widespread and successful simultaneous hacking attempt ever.

After logging in, the hackers tweeted out faux messages claiming that the celebrity would double any amount of bitcoin they were sent. Some of the tweets (including the one attributed to Barack Obama) also noted that the sudden generosity was due to COVID-19.

The half-hour deadline, of course, was necessary because the hackers knew that from the moment they clicked on “Send” the clock would be ticking. They would be lucky to have even that much time before the true extent of the crime would be discovered and their phony posts were removed. Victims had to be found and suckered into the scheme before it was too late. And it turned out to be a very successful bitcoin crime. The scammers walked away with 12.5 bitcoins, then the equivalent of $121,000. Not bad for one night’s work. They lost out on another $278,000 because an alert cryptocurrency exchange intervened to prevent it.

Despite the publicity that the episode generated, Twitter accounts continue to be hacked for purposes of committing bitcoin crimes. In January 2021, crypto criminals walked away with what was then the equivalent of approximately $587,000 in bitcoin by hacking into a number of verified Twitter accounts. They changed the account holder’s name to Elon Musk and repeated the same discredited offer used less than half-a-year earlier.

Ponzi and Pyramid Schemes

Needless to say, most cryptocurrency investors acquire digital currency because they believe that their investments are going to appreciate in value at a rapid pace. So why would someone offer you a higher interest than the market currently bears? The most obvious answer is because the offer is a red light for a cryptocurrency Ponzi or pyramid scheme

One such bitcoin pyramid scheme, GladiaCoin, promised to double the value of all bitcoin deposits within 90 days. It collapsed from its own weight in June 2017. The paradigm continues to pop up. All online bitcoin pyramid schemes that employ the same “double your money in 90 days” business model eventually have to collapse. The main difference between the operators of these sites and Charles Ponzi, who gave his name to this type of scheme, is that these guys, unlike the late Mr. Ponzi, are anonymous.

How to Recover Scammed Bitcoin

So can you recover bitcoin lost to a cryptocurrency crime? Yes. Is there any government-run bitcoin recovery service? No. Can MyChargeBack assist with crypto recovery? In most cases, yes. Can MyChargeBack assist me recover bitcoin? In most cases, yes. Is there such a thing as cryptocurrency chargeback in general or bitcoin chargeback specifically? No, at least not yet, although under certain exceptional circumstances you can obtain a chargeback if the crypto you thought you bought using a credit or debit card was never supplied.     

If you think you have a complex transaction dispute involving cryptocurrency, consult with the fund recovery experts at MyChargeBack. Tracing cryptocurrency is complex and mistakes can cost you. MyChargeBack analyzes your case and assists you throughout the entire investigative process.

Do You Have a Complex Dispute?

Did you pay with a credit card or debit card? Bank wire? Cryptocurrency?

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