Last week, some high-profile people had their Twitter accounts hacked by scammers who sent out fake tweets asking followers to send money using Bitcoin. This incident has pushed cryptocurrency back into the spotlight and, to avoid scams, you would be wise to understand why.
Before we go any further, let’s do quick refresher: Bitcoin is a virtual currency, but it’s not backed or sanctioned any government. There’s no centralized bank or reserve either. Yet, just like cash money, digital currency like bitcoins can be bought, traded, or earned—you just don’t have a physical coin or bill to tuck in your pocket.
So what is its appeal?
The FTC says Bitcoin (and other virtual/cryptocurrencies) is often used for quick payments and to avoid transaction fees. Also, some people consider cryptocurrencies an investment because their value has been on the rise.
Virtual currencies also have another big feature criminals love: they don’t offer any legal protections which makes them pretty much untraceable. If you buy something using Bitcoin and want to file a dispute, you’ll only get your money back if the seller sends it back.
As a result, “Cryptocurrency scams are now a popular way for scammers to trick people into sending money,” the FTC says.
Sometimes criminals try blackmail, claiming they know something embarrassing about you. There are also chain referral schemes, where you’re promised money if you pay into a scheme but to recruit others you must first make a cryptocurrency payment. Bogus investment and business opportunities are another popular cryptocurrency scam. You’re guaranteed big money, but you’re left with an empty wallet.
“But here’s what they all have in common—and what they have in common with the Twitter hacks: A scammer wants you to send money, or make a payment, with Bitcoin or another type of cryptocurrency. Once you do, your money is gone, and there’s generally no way to get it back,” says the FTC.
How avoid these scams is simple: If you see a tweet, text, email, or other social media message that says you need to pay with Bitcoin or other virtual currency, don’t do it—it’s a scam. And, don’t be tempted by offers to make quick money, double your money, etc. Those kinds of offers are always fake!
If you spot a cryptocurrency scam, report it immediately to the FTC at ftc.gov/complaint.