The world of cryptocurrency has been a hot topic around the world and as the popularity of cryptocurrency investing increases, so does the frequency with which scammers target would-be investors.

BBB Scam Tracker has received multiple reports from consumers who have been targeted by scammers claiming to be “cryptocurrency management investment funds” or “binary options brokers.” These con artists are looking to take victims’ money, with no real intention of working as their investment broker.

What are virtual currencies?

According to the Commodity Futures Trading Commission, virtual currencies are “a digital representation of value that functions as a medium of exchange, a unit of account and/or a store of value.” In other words, each currency is represented by alphanumeric codes that may be generated and recorded on a blockchain network and recognized as a method of payment by users on that network. In some cases, you can spend and trade virtual currencies, but these products do not have the same legal status as money, or “legal tender,” in the United States, Canada, Mexico and most other jurisdictions.

The Internal Revenue Service says virtual currencies are to be treated as property for U.S. federal tax purposes, with transactions required to be reported in U.S. dollars. If virtual currency is used to pay wages, it is subject to federal income tax withholding, and gains and losses from the sale or exchange of virtual currency have tax implications. If you hold virtual currencies for personal or investment purposes, the IRS requires you to report any gains or losses, which would be subject to capital gains tax rules.

One popular type of virtual currency is known as cryptocurrency, or simply crypto. The term crypto refers to the process of cryptography, which is a mathematically intensive encryption process designed to enhance data protection and authentication. Some people are interested in cryptocurrencies for their perceived anonymity and ability to keep transactions secret. One of the earliest and perhaps most well-known cryptocurrencies is bitcoin.

How the scam works

The connection is often made through social media, by a person or company claiming to help people invest in cryptocurrency. The person reaching out through these channels offers returns that seem too good to be true. You show interest, so the “investor” directs you to a website that looks professional and encourages you to sign up with their company. After completing the registration, they ask you to transfer money by wiring funds or depositing cryptocurrency into their online wallet.

Once they receive your “investment,” the scammer becomes difficult to contact or disappears completely. You receive no return, and your investment funds are gone for good.

How to avoid cryptocurrency scams

Do your research. Make sure you have more than a surface understanding of how cryptocurrency works before you begin purchasing and investing. To learn more, check out BBB.org/Crypto.

Research investment companies and brokers thoroughly. Make sure any company you are considering doing business with is legitimate. FINRA, the Financial Industry Regulatory Authority, offers a free service called Broker Check (brokercheck.finra.org/) to help you find a licensed broker or agency. You can also look up the business at BBB.org to read about previous customers’ experiences.

Understand the risks. All investments can be risky, and cryptocurrency is no exception. Never invest funds you can’t afford to lose. Read FINRA’s “The Reality of Investment Risk” (finra.org/investors/reality-investment-risk) for additional information.

For more information

To learn more about how cryptocurrency works, check out BBB.org/Crypto. This is a resource that was developed by the Better Business Bureau and FINRA. You can find more information on businesses on our website BBB.org.

To learn more about scams, go to BBB.org/ScamTips. If you’ve been targeted by this scam, help others avoid the same problem by reporting your experience at BBB.org/ScamTracker.

Let’s block ads! (Why?)


Source link