Is There Such a Thing as Cryptocurrency Fraud?
During our fourth session of Fraud Office Hours, an attendee asked, "Is there such a thing as cryptocurrency fraud?" Watch this video clip and read below to see how Unit21's Head of Fraud Risk, Alex Faivusovich, responded.
Is Crypto Fraud Prevalent and How to Prevent It
"If we look at crypto fraud on a larger scale, we see a lot of rug pulls; where crypto developers lure in investors, create a coin, and then disappear.
The short answer is yes, there is cryptocurrency fraud. This is especially true if you consider this from an investor’s perspective.
With consumers, we are mostly dealing with scams that circle around the basic concept that most consumers who are in crypto aren’t adept, savvy investors. They are often new to the crypto market and are just testing the water and therefore don’t really know how to protect their digital assets adequately. Many crypto scammers are taking advantage of this disconnect to commit fraud.
Let's take a step back and look at crypto on a larger scale. We see a lot of situations where crypto developers lure investors, make promises about the growth and value of the coin, and then disappear after people have invested, taking the money with them. This has been happening regularly in recent years, and was more frequent in 2021 and 2022 as more fraudsters learned how to take advantage of new token schemes.
If you’re new to the crypto market and you’re in the group of investors that are testing the waters and learning about the crypto market, you’ll want to make sure you do adequate research and preparation. There is a lot of literature out there, you just need to find the right resources.
It’s essential for consumers to do research to fully understand where the potential risks are and what scams are prevalent, so you know how to respond. Understand the difference between hot wallets and cold wallets, and how to protect your crypto assets more effectively.
This is extremely important, as you can’t reverse this fraud after it’s occurred - once the coins leave your digital wallet, they’re gone for good. Currently, crypto exchanges and markets don’t have the same protections as traditional banks, and there is more responsibility on the user to protect their assets. Make sure you do the research and know how to avoid the biggest crypto scams.
Looking for more insights? Check out our fourth session of Fraud Office Hours on-demand for a deeper dive into crypto fraud and which preventative measures to consider.
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