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As crypto firms collapse, fraud and scam invitations seem to be rising

Have you recently received an electronic message like this?

“Can we be friends? Learn to make money together! I can get 3.5% of stable income every day by investing in cryptocurrency, which is very safe and without any risk. If there is a loss, the company pays.”

When I got the message early last week, I immediately deleted it.

Problem is, “too good to be true” messages are increasing with the number of frauds and scams associated with crypto-assets.

This insight doesn’t even account for misappropriated customer assets and other shenanigans by crypto evangelist Sam Bankman-Fried and his defunct crypto companies. Despite the gold-spinning hyperventilation of techno-utopians, crypto seems only good for gambling and fraud.

Crypto is a market tailor-made for scammers. The crypto market is unregulated; transactions cannot be reversed; and most people don’t understand how digital currencies work.

A report from the Consumer Financial Protection Bureau from November analyzed consumer complaints filed with it about crypto from October 2018 to September 2022.

The most common complaints involved fraud and scams, at 40% of the total. I find it alarming that complaints of fraud and scams have risen to more than half of the total this year. I suspect that the numbers will go even higher with the crypto market turmoil.

A Federal Trade Commission report from last June estimated that more than $1 billion was lost to crypto scams from January 2021 to March 2022. The median individual loss was $2,600. Ordinary people are being fleeced by crypto fraud.

There are many varieties of crypto scams. The top three: Romance scams, scammers posing as influencers, and “pig slaughter.” In case you were wondering, hog slaughter is the buzzword for scammers who pose as financial successes to gain victims’ trust and persuade them to set up crypto accounts.

None of the techniques detailed in the government reports are exclusive to crypto. The larger lessons of how best to avoid crypto scams apply to other scams.

As criminals thrive during the holiday season, it’s worth reviewing some of the best ways to protect yourself from crypto and other scams. Among them:

  • Only scammers “guarantee” profits or lush returns. The guarantee is impossible.
  • No one legally will require you to buy cryptocurrency. This is a scam.
  • Online dating and investment advice don’t mix. Period.
  • Only invest in things you understand, including cryptocurrency.
  • Take your time. Scam artists will pressure you to act quickly. Do not.

Farrell is economics contributor to the Star Tribune, Minnesota Public Radio and American Public Media’s “Marketplace.”

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