By Evan Spicer
Director of Cryptocurrency Investigations
People who are looking for excitement or who want to make some extra money on online platform are increasingly flocking to cryptocurrency trading. Although there are many safe and legitimate ways of trading cryptocurrencies, there are also unfortunately many shady crypto schemes. Some demand customers use only cryptocurrencies to fund accounts.
Many users feel that cryptocurrency is a convenient alternative to credit cards. They may protect sensitive data from hackers through blockchain encryption, but it may make consumers more vulnerable to crypto scams if they fund their accounts with cryptocurrencies.
The reason to use extra caution with cryptocurrency is that fund recovery can be complicated, but not impossible, on the blockchain. If you have lost money to a fake broker or or a crypto Ponzi scheme, speak to a financial services firm that has extensive experience with blockchain fund recovery.
MyChargeBack experts create intelligence reports and crypto reports that help investigators track down crypto scams. We also provide guidance to consumers who are trying to recover their funds from broker disputes and trading schemes. Talk to MyChargeBack professionals and get started on fund recovery.
Portrait of a Crypto Ponzi Scheme
Although Charles Ponzi created his first one a hundred years ago in the 1920s and bequeathed them his name, the structure of the Ponzi scheme predates him and it is still being used today. A Ponzi scheme operates by funding withdrawals with deposits of new participants.
This is not supposed to happen in the case of a broker who is trading on behalf of a client. However in Ponzi schemes, no trading takes place. Instead, money circulates in and out of the broker’s account until there is no new money to fund withdrawals. Then those behind the Ponzi scheme will disappear with the money and hide their identities.
The fastest growing arena for fraud is in the area of cryptocurrency. These operations take all forms, including Ponzi schemes. Recently, the AntUSDT platform was exposed as a Ponzi scheme. It shut down its operations, stopped withdrawals and removed its social media presence.
AntUSDT, before disappearing, released its customer withdrawals with a basically worthless cryptocurrency coin that was nothing more than a token of the Ponzi scheme. The case of AntUSDT points to the danger of funding a brokerage account with cryptocurrency as well as depending on crypto coins for withdrawals. Unfortunately, many types of crypto coins are either fake, poorly performing, or have very little value.
Of the many thousands of crypto coins available, only a few varieties manage to hold any consistent value. Therefore, funding a brokerage account and accepting withdrawals in such altcoins is more than a little risky. This is added to the risks inherent in cryptocurrency trading which are substantial, since cryptocurrencies tend to be quite volatile.
Those who ended up trading with AntUSDT saw deals advertised on social media. These deals offered a return of 1% daily, which was impossible. For instance, reliable brokers return an average of 10% annually, so these outsized claims should have raised alarm bells. In addition, this broker was not licensed and operated through social media rather than a secure website.
In addition, the platform ran on cryptocurrency. This means that funding an account was done through cryptocurrency. Those who sought withdrawals were even given worthless crypto tokens or were given excuses and delays.
Because the transactions were not made through credit cards, chargebacks were not available. What complicates this Ponzi scheme is that clients’ money was recorded anonymously on the blockchain with no issuing banks or regulators to deal with complaints. This makes fund recovery challenging.
When and When Not to Use Cryptocurrency
Cryptocurrency represents a new world in finance and currency, but it is important not to allow the excitement to take over. There is always a risk in using cryptocurrency for purchases if there is any reason to suspect that a refund will be required.
Transactions are recorded on the blockchain in a way that they can’t be reversed. To get your money back, an additional transaction is required. This is quite different from credit cards and PayPal, which have chargeback processes with third parties adjudicating between merchants and customers.
Should you use cryptocurrency for minor purchases? It may be all right to use bitcoin on e-commerce sites that have a clear returns policy and a procedure for dealing with customer complaints. However, when dealing with an unregulated broker or a small merchant, cryptocurrency can be a huge risk, especially if a customer is funding a brokerage account to the tune of thousands of dollars.
Therefore, using bitcoin for small purchases on a major e-commerce site you have experience shopping with may be relatively safe. Funding an account with an unlicensed broker or a merchant you do not know is far more dangerous. If you are using money in a fairly risky situation, use credit cards so you will at least have the option of a chargeback process available.
However, it is important not to depend too heavily on the opportunity to file a chargeback claim. Issuing banks are overwhelmed with chargeback requests and are more likely to reject them than in the past. In addition, fraud, as defined by the credit card networks and banks, means only unauthorized purchases.
In general, your best bet is to deal only with regulated financial services and find other ways to fund accounts, like a credit card or, to avoid unwanted interest charges, a debit card. Cryptocurrencies may be fine to trade but do so only with reliable brokers who accept various payment methods and provide complete transparency about their services, fees, and who they are. If you need fund recovery from a crypto broker, speak to MyChargeBack professionals.
If you have lost money to a crypto fraud or are involved in a broker dispute, it is important to seek guidance immediately. Consult with MyChargeBack experts and provide information that can help us draw a crypto report and speak to regulators and authorities. We can assist investigators and help you with fund recovery.