Cryptocurrency is a digital or virtual currency that uses cryptography for security. A defining feature of cryptocurrencies is that they are not issued by any central authority, making them resistant to government interference or manipulation. Cryptocurrencies are decentralized and often anonymous, which has made them popular with investors who value privacy.
In recent years, government agencies in the U.S. have been cracking down on some of these fraudulent activities involving cryptocurrency.
High tech version of old schemes
Cryptocurrency is new, but people find ways to recycle previous frauds, such as:
- Tax avoidance – people have been using the portability of crypto to move it among international accounts to avoid paying taxes.
- Fake offerings – websites with fake bios and technical whitepapers are set up to trick people into giving away their personal information or financial resources.
- Pump and dump – current coin owners artificially drive up the price with fake claims, and once the price is at a peak, they sell off their crypto.
- Ponzi schemes – brokers will use fake financial statements to lure new investors and use the money from new investors to pay off older investors.
Because most people are unfamiliar with cryptocurrency, they are easy to defraud. For example, in 2018, a man claiming to be Satoshi Nakamoto, the creator of Bitcoin, persuaded people to invest millions of dollars in a fake cryptocurrency called Bitconnect.
In 2021, two brothers received an indictment for defrauding investors by telling them they were investing in cryptocurrency and then diverting the funds for their personal use.
Cryptocurrency fraud is highly complex and technical. If you are accused of fraud, you could be facing severe penalties. Don’t speak with any investigators. Instead, gather all your documentation and contact someone about mounting a solid defense.