Posted on Tuesday, November 19, 2024

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by Outside Contributor

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Crypto scams, a type of financial crime, is on the rise and people over 60 are primary targets. Every year, the FBI publishes its Internet Crime Complaint Center (IC3) report on fraudulent activities – including crypto scams – targeting the elderly. In 2022, the IC3 received about 10,000 complaints involving the use of some type of cryptocurrency crime involving a person over age 60, reporting total losses over $1 billion.¹ In 2023, the number of complaints grew to nearly 17,000 with losses increasing to more than $1.6 billion.²

Crypto transactions are typically irreversible and oftentimes untraceable. To understand why, it is essential to know the basics of cryptocurrency:

• Cryptocurrency Definition. Cryptocurrency is a digital currency, an alternative form of money not issued by governments and typically transacted electronically. The “crypto” refers to the encryption algorithms that make up cryptocurrency. Well-known cryptocurrencies include Bitcoin and Ether, though new ones get added regularly.
• Cryptocurrency and the Blockchain. Cryptocurrency transactions are made through crypto wallets, unique identifiers encompassing a long string of alphanumeric characters. For every transaction, the sender’s and recipient’s wallet addresses are recorded on the blockchain, a public ledger that lists payments and receipts.
• Decentralized and Mostly Unprotected. Monetary currencies like the dollar or euro are centralized, which means they are issued and backed by governments. Digital currencies are decentralized, so they lack the legal protections of credit or debit cards, making them increasingly the preferred payment method of financial fraudsters.

Crypto scammers have various methods to find potential targets. They may search the internet, especially social media, looking for information on their targets – typically people who may not understand how cryptocurrency works.

Once they have connected with a potential victim, whether through social media or emails, they go to work on winning the target’s trust. This can come in the form of scammers presenting themselves as experts in digital assets or other financial areas. Upon receiving payments from their targets, scammers take many precautions to make it nearly impossible to trace the funds. This includes transferring them over multiple transactions to other wallets and exchanging them from one type of cryptocurrency to another.

Crypto scammers also look for individuals facing financial challenges and seeking a quick solution. For example, many Americans are either nearing retirement age, or have already reached that age, and have very little, if any, retirement savings. According to the U.S. Census Bureau, 49% of adults ages 55 to 66 had no personal retirement savings in 2017.³ Those who fall in this demographic may feel the need to try and make up their retirement fund deficit as quickly as possible. Criminals are targeting this group with cryptocurrency promises of quick and large returns. Victims of such scams are much less likely to get their money back.

For the Love of Money

One way to illustrate a common crypto scam is through this sample scenario. Bob, a widower after 40 years of marriage, decided to try social media for the first time. His wife Deborah had been gone for two years and Bob was starting to feel lonely. After just a few weeks of putting up an online profile, he got a friend invite from a woman named Lisa. She was friendly and seemed to be interested in Bob and his activities. Lisa shared that she was an investment manager and loved to share financial tips with others to help them earn large returns on investments (ROI). Bob was intrigued. He and his wife had tried to save toward retirement over the years, but there were always big expenses and emergencies that ate away at their little nest egg. Bob was eager to finally make real progress and hopefully fast. It also helped that Bob was developing feelings for Lisa. He trusted her.

Lisa said that cryptocurrency investing was just the thing for Bob to make lots of money quickly. She suggested they start with a small amount. This made Bob feel even more comfortable with moving forward. Lisa recommended starting with an initial investment of $200. After two weeks, Lisa shared a screenshot of Bob’s fake crypto account, claiming his $200 investment had already grown to $2,000. Bob was elated and confident to invest even more. Next, Bob parted with $500 and soon enough Lisa showed him a view of a crypto wallet containing $9,000. Bob was all in at that point and trusted Lisa with $15,000 of his money to invest. Unfortunately, after trusting Lisa with the $15,000, Lisa’s social media profile disappeared, and Bob never heard from her again.

How to Avoid Crypto Scams

As with all financial scams, the number one thing to be aware of are unsolicited offers. Here are other tips to help avoid falling for a crypto scam:

• Be proactive in your financial matters. All financial investments require initiative on your part. Research the investment area of interest and extensively investigate the business and/or platform you will be working with.
• Do not act immediately. Scammers typically use high-pressure techniques because they understand time is not on their side. Take all the time you need to do your research.
• Avoid sending crypto payments. Individuals or businesses that will only accept cryptocurrency as a form of payment are likely scammers.
• Do not mix digital love and money. If a new, online love interest wants to introduce you to a crypto investment, or any financial investment, it is a scam.
• Never click links from unknown sources. As with email and text phishing scams, do not click on links in ads, especially on social media sites. If you are interested, do an online search for the company name and start your research from there.
• Beware of get-rich-quick schemes. Understand that if it sounds too good to be true, it likely is. No legitimate investment professional or organization will promise you quick and huge ROIs.

Understand the Risks

Before making any investment, understand the risks. Even with legitimate cryptocurrency investments, risks are multiplied due to the volatility of cryptocurrency markets. Values can change within an hour and drop by thousands of dollars in a day. Consider discussing your financial goals with a loved one or a trusted and verified financial professional to help prevent becoming a victim and eliminate frustration when the time comes for you to invest.

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