Every year, billions of dollars are lost to one crypto scam or another, and these fraud schemes are on the rise. Fund recovery and preventing similar scams from succeeding include knowing how to report any fraudulent activity.
Thus, this guide outlines the procedures for identifying, reporting, and protecting oneself from potential crypto scams.
Recognizing Common Crypto Scams
The first step in reporting a crypto scam is the pattern. Many scams share common traits, and understanding them can help you spot suspicious activities. Consider the following types of scams:
- Unsolicited Investment Offers
Scammers target their victims with social media and emails, even text messages, assuring them of a high return with no risk. An investment with zero risk and high returns is a scam red flag.
- Phishing Scams
People posing as legitimate representatives of various crypto firms send out convincing emails and spoof websites, stealing the credentials of crypto firm users or coercing them into authorizing bogus transactions.
- Ponzi Schemes
These are scams in which the scheme pays initial investors with funds from new investors. A well-known example in the crypto space would be OneCoin. The firm stole over $5.8 billion from countless investors.
- Fake Initial Coin Offerings (ICOs)
Here, scammers make false claims about the launch of a new technology firm or crypto projects. Then, they claim the need to raise funds for token issuance but vanish into thin air without putting out anything in return.
If you believe you’ve encountered one or more of these scams, your best option is to report them quickly.
Where to Report a Crypto Scam
In the US, three institutions handle crypto scams and fraud cases.
- CFTC
The CTFC supervises digital assets categorized as commodities and derivatives. You may report fraud through their whistleblower program, which also rewards those who provide the agency with information of interest.
- SEC
The SEC administers the appropriate laws on the frameworks of projects in the crypto space that have not been registered with the regulator or have scam-related signals.
- FTC
The FTC deals with false or misleading advertisements or practices targeting consumers, including any crypto investment scam.
- IC3
Even though the FBI runs the IC3, it functions as a centre for cybercrime. To describe cyber fraud, filing any information may help identify suspects or freeze the money stolen.
Steps to Reporting a Crypto Scam
You must follow procedures to report a crypto scam or fraud successfully.
Evidence
Consolidate all means and information regarding the scam, such as targets, p2p communication logs, transactional evidence, and advertisements (screenshot).
Submit Complaints
If the incident is exchange-related, you can file a complaint with official bodies such as the FTC, SEC, IC3, or Coinbase.
In-Depth Communication
Outline the steps you took that confirmed that the incident was a scam. For instance, you should provide the chat details, transaction times, and specific wallet addresses if it concerns mobile wallets.
Any other info that helps identify the scam, such as an email address or phone number, is equally important.
Follow-ups
Even though the agencies will not provide updates due to privacy issues, the case is likely moving forward, and you can check with them occasionally.
How Not to Expose Yourself
Remember to conceal your identity from the public when reporting scams, including sensitive information about you. Use protected means of communication and only provide the details that the agency requests.
Consult a lawyer to make the reports if you prefer to remain anonymous. After you have made this report, be on the lookout for any strange activities in your accounts.
If you encounter odd offers or transactions, report them to your bank or crypto wallet provider immediately.
How Authorities Investigate Crypto Scams
After you file a report of the scam, law enforcement agencies review the case. If they realize it is true, they may contact organizations that deal with blockchain analysis, such as Chainalysis.
Due to blockchain’s public nature, investigators can accurately track stolen assets and suspicious actions. Once they have enough evidence, the agencies take action against the fraudsters to retrieve the funds.
Importance of Reporting a Crypto Scam
Many scam victims find it difficult to disclose their losses or feel embarrassed because they believe the authorities will not act. However, this isn’t true.
For every case reported, agencies can apprehend scammers and trace some of the lost funds. Even if the authorities can help you recover your funds, your report might help someone else from being a victim of a similar exploit.
Final Thoughts
The unregulated crypto market is vulnerable to fraud. Hence, you should be proactive and report the scams to prevent them from happening to you.
Don’t waste time if you have evidence that you are a scam victim. Provide the authorities with the information they need.
Thus, you can retrieve your funds and help others to avoid falling victim to the same issue.
