Crypto Red Flags And Scams Abound For Burned Investors

Crypto related currencies have been called a lot of things. The next big thing. A bright, shiny object.  When top financial regulators say they aren’t comfortable that they haven’t learned about the full dangers of crypto, you’re wise to be wary too. Investment promoters often try to convince hungry investors they can turn hot topics of the day from oil and gas fracking to self-driving cars into wealth.

But often the only wealth that surfaces from their drumbeat is an abundant pile of victims.  Crypto crooks stole over $4 billion from investors this year, the blockchain consulting firm CipherTrace warned in a new study.  Even the sophisticated are vulnerable and increasingly so.

“Exchanges and users are facing a greater sophistication in the tactics, techniques and procedures (TTPs) cybercriminals are using to target the cryptocurrency space. In the case of exchange robberies, hackers have developed advanced methods to overcome even the current “best practice” security in place at the more vigilant exchanges,” CipherTrace cautioned.

As an example, hackers used advanced cyberattack to steal $44 million from world’s largest cryptocurrency exchange, Binance,” a report from the consultant noted.  One tactic the criminals are using is called typosquatting, CipherTrace said.  In the scheme, crooks snare victims in their web by purchasing web domain names that trap investors who make typos when they are trying to enter legitimate sites (e.g., vs in the hopes of trapping users who make typos, explained CipherTrace.

European authorities have made arrests in two major typosquatting scams that cost crypto exchange users tens of millions, according to the firm. The report emphasized exit scams, where bogus entrepreneurs collect money from investors in an initial coin offering and then abscond with the dough, are growing big time from the U.S. to Poland to Ireland to South Korea.  CipherTrace said it heard of but could not confirm an exit scam involving a South Korean crypto wallet and exchange robbed investors of $2.9 billion.

If you’re considering throwing more than fun money into cryptocurrency or other crypto assets such as initial coin offerings, you may want to consult with an attorney to see if there are any red flags in the disclosures on social media and with the regulators. Unfortunately, hundreds of investors at major U.S. brokerage firms like JP Morgan and Morgan Stanley have been taken in various crypto related frauds, scams and selling away schemes.   This trend will likely continue with an expected surge of Financial Industry Regulatory Authority (FINRA) arbitration claims and enforcement actions against the peddlers of these high risk securities.


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