Scammers are using cryptocurrency to steal your money

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By Crystal Baldwin 

Recently, three Vermonters reported losing just under $1 million in total to cryptocurrency scams.  Entire retirement accounts were drained, and because of early withdrawal penalties, thousands of dollars are due to the IRS.  Some owe family members for funds borrowed on the chance that cryptocurrency would substantially increase their investment. 

$80 Million Lost to Cryptocurrency Scams since late 2020 as reported by the Federal Trade Commission.
$80M Lost to cryptocurrency scams since October 2020 as reported by the Federal Trade Commission

As a peer-to-peer spending source, every type of scam could at any point use cryptocurrency as the preferred form of payment, over gift cards, wire transfers, and cash, for example.  According to the Federal Trade Commission, cryptocurrency scams have been increasing since 2017 and “skyrocketed” at the end of 2020 (ftc.gov). 

So, what is cryptocurrency? 
In very basic terms, it’s virtual money that uses its own currency, or monetary system.  When we usually think of currency, it’s affiliated with a specific country, has an exchange rate and is produced as banknotes and coins known as fiat currency.  The money in a U.S. bank account will note an amount in U.S. dollars, for example.  Cryptocurrency is usually unaffiliated with a particular country, maintaining its own exchange rate.  As such, cryptocurrency is not backed by any government or other central bank (ncsl.org) like we are used to with US banks which are FDIC insured—insurance that protects your money from bank failure. 

Cryptocurrency is...Risky digital currency recorded in an online public ledger called the "blockchain" A peer-to-peer payment method Stored in a digital wallet (software/app) accessible to users with a computer or a mobile device Transferred as encrypted information (called public and private keys) Not bound by geography nor backed by government or other central bank Anonymous, like cash transactions Taxed as any other income
Information by ncsl.org and finra.org

How is cryptocurrency used? 
To spend using cryptocurrency, a user needs a digital wallet accessible through software or an app and some funds to deposit to convert into cryptocurrency, such as Bitcoin.  There are many different cryptocurrencies, affiliated applications/websites.  Not all cryptocurrencies are the same and, unfortunately, some are entirely fake. 

When transferring, your funds are assigned a unique password that is required to move funds. As such, the transfer of funds happens instantly, with little federal oversight or regulation, making cryptocurrency the currency of choice for fraudsters. 

Cryptocurrency is the preferred payment method of scammers.   
Any type of scam can manifest with crypto being the scammer’s preferred mode of transfer.  Scammers like cryptocurrency, because, unlike with traditional bank transfers and transfers done by a money transmitter (like Western Union and Money Gram), there is no third-party banking institution involved in the transfer.  The transfer itself is peer-to-peer and performed with a unique encryption code (in simple terms, think of the best password you have ever set eyes on).  This means, if you have money in bitcoin and the receiving party receives your encryption code, now the receiving party has your money.  All cryptocurrency transactions that are completed on the blockchain are irreversible and funds cannot be recovered. 

Cryptocurrency scam alert: Ponzi schemes, investment scams and unlicensed sellers, stock scams, hackers and computer tech support scams
Be on the lookout for these cryptocurrency scams

The exchange of funds happens instantaneously, virtually and globally, making the jurisdiction of the monetary exchange difficult to determine.  Even if the receiver says they are in the U.S., you will not be able to verify this claim.  

Is Cryptocurrency an investment or a scam—an investment scam, or something else? 
According to the Securities and Exchange Commission (SEC), cryptocurrency is a “highly speculative investment” and the “Bitcoin futures market should be pursued only by mutual funds with appropriate strategies that support this type of investment” (sec.gov).  A speculative investment is one with a high degree of risk with hopeful long term gains. 

There are a number of fake and a number of honestly operating cryptocurrency investment firms. There remains little regulation in the field.  The SEC indicates, “While these digital assets and the technology behind them may present a new and efficient means for carrying out financial transactions, they also bring increased risk of fraud and manipulation because the markets for these assets are less regulated than traditional capital markets” (sec.gov).  The Financial Industry Regulatory Authority (FINRA) echoes that “The markets for cryptocurrencies remain highly volatile and risky.” To learn more about cryptocurrency markets and products, review the helpful resources on the FINRA website. 

More to consider: 
As an entirely digital currency, all access points are digital.  Individual accounts can be hacked and cryptocurrencies themselves are not foolproof.  When a cryptocurrency’s system is breached, millions of dollars are lost, as demonstrated in breaches; Bithumb lost $30 million, Coinrail lost $37.2 million, BitGrail lost $195 million, and Coincheck lost $534 million (investopedia.com).  

A person that opts to use cryptocurrency must ensure their account is protected and secure against the most determined hacker.  Even still, there are ways that scammers can obtain direct access to your digital accounts.  Through a convincing tech support scam, they claim there is a problem with your account that must be solved, and you sign them in, allowing them access to everything.  Another easy route is with a simple click of the mouse, the computer can be infected with viruses, opening the virtual door for your computer and accounts on it to be susceptible to scams.   

Without proper security, ensuring your systems will not be breached, one simple hack can risk your entire cryptocurrency account.  With this in mind, digital currency may not be the right choice for someone who sets easy passwords, performs few antivirus checks, or is a carefree web user.     

Report Scams: 
If you or someone you know have encountered a scam in Vermont, report it. Use CAP’s online scam reporting form.  

Help us stop these scams by sharing this information with those you care about. 

References: Finra.org, sec.gov, investopedia.com, ncsl.org, investor.gov. fdic.gov, ftc.gov

Identity Theft How to Guide: 5 Steps

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By Emily McDonnell and Katherine Rivers 

Protect yourself from Identity Theft

The state of Vermont defines identity theft as the unauthorized use of another person’s personal identifying information to obtain credit, goods, services, money, or property. It is common that identity theft occurs from use of your credit card and bank account information.  

There are some instances where your social security number and other personal information may be used to acquire identification, lines of credit, loans, or other consumer accounts fraudulently. For more information on Vermont laws regarding privacy and data security, click here. 

Identity theft is more common than you would think and it is evolving rapidly with the growth of technology. All our information is a couple clicks away.  

Here are 5 ways to protect yourself if you suspect you are a victim to identity theft:

  1. Review Your Credit Reports.  You can obtain your free credit report from each of the credit reporting bureaus through AnnualCreditReport.com. If you find anything that should not be there, be sure to save a copy of the report. Then, contact the credit reporting agency to dispute all inaccurate items.
  2. Place a Fraud Alert or Freeze on Your Credit Reports.  You can find out more information from the Federal Trade Commission about fraud alerts and freezing your credit files. To place a fraud alert or freeze on your credit files, contact the three credit reporting agencies: Equifax, Experian, TransUnion.  
  3. Close Accounts. Close any accounts that have been tampered with or opened fraudulently.  
  4. File a Police Report. File an “identity theft” police report and ask for a copy for your records. Find your local policy agency.
  5. File a Complaint with the Federal Trade Commission. Click here to be directed to the complaint page of the Federal Trade Commission.  

Want More Info?  

Identity theft is a complex issue facing consumers all over the country. Find out more about identity theft by visiting identitytheft.gov, the Federal Trade Commission’s identity theft help and information site.  

Navigating the identity theft recovery process can be overwhelming.  Vermonters with questions about the process can call the Consumer Assistance Program at 1-800-649-2424 or the Federal Trade Commission at 1-877-438-4338. 

Resources:

Federal Trade Commission and IdentityTheft.gov

Over-the-Counter Hearing Aids: Not FDA Approved

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By Crystal Baldwin

My dad lost his hearing while working as a fighter jet mechanic on an aircraft carrier. As the jets took off and landed, he was uncomfortably close to their reverberating buzzsaw rumble.  The resulting ringing in his ears (tinnitus) proved a constant source of agitation the rest of his life. When I talked to him about a potential solution, he would shrug and say, “Hearing aids are expensive, and they aren’t going to make the ringing go away.”  He wanted an easy solution and a quick fix to bring back his hearing.  If someone made the promise that he could have his hearing returned with the purchase of a low-cost over-the counter device, he probably would have bought it. 

Such quick fix products are on the market today.  The trouble is, unlike traditional FDA-approved hearing aids, which a consumer would purchase through the process of visiting their doctor and being fitted, the quick fix over-the-counter hearing aids come with no FDA backing—even if they say they do.  Congress authorized the sale of over-the-counter hearing aids for adults with mild to moderate hearing loss in 2017.  At the time, the Food and Drug Administration (FDA) was directed to establish regulations: standards for safety, consumer labeling, and manufacturing protections.  FDA regulations of over-the-counter hearing aids have not yet been established. 

When considering purchasing hearing aids or similar products, it is recommended to: 

Be evaluated by a medical professional or licensed hearing specialist to determine if an over-the-counter hearing aid will help you. Watch out for and avoid over-the-counter hearing aids that make false claims about the product, such as stating they are FDA-approved, endorsed by the FDA, or have an “FDA Registration Certificate”. Do your homework! If a deal seems too good to be true, then it probably is. Research the hearing aid seller on impartial review sites. Consider all reviews, being skeptical of short reviews and extremely positive testimonials and reviews on a company’s website. Be skeptical of promises of deals that are much cheaper than what consumers would pay for a traditional FDA-approved hearing aid. Question free-trial offers, which claim the product is free to try for a set period but will bill you at the end of the free trial.
  • Be evaluated by a medical professional or licensed hearing specialist to determine if an over-the-counter hearing aid will help you. 
  • Watch out for and avoid over-the-counter hearing aids that make false claims about the product, such as stating they are FDA-approved, endorsed by the FDA, or have an “FDA Registration Certificate”. 
  • Do your homework! If a deal seems too good to be true, then it probably is.  
    • Research the hearing aid seller on impartial review sites. 
    • Consider all reviews, being skeptical of short reviews and extremely positive testimonials and reviews on a company’s website. 
    • Be skeptical of promises of deals that are much cheaper than what consumers would pay for a traditional FDA-approved hearing aid. 
    • Question free-trial offers, which claim the product is free to try for a set period but will bill you at the end of the free trial.  

If you are having an issue with an over-the-counter hearing device, Vermont consumers can file a complaint with the Vermont Attorney General’s Consumer Assistance Program.   

Resource: US Food and Drug Administration: Hearing Aids: https://www.fda.gov/medical-devices/consumer-products/hearing-aids  

Identity Theft and Phishing

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By Crystal Baldwin

When I presented on the topic of identity theft a decade ago, the concept seemed somewhat distant, impacting few individuals with identity thieves using dated and laborious tactics to steal identities.  A section of my presentation was devoted to informing about dumpster diving—the fact that people can get a lot of information about your identity from the trash you discard—and encouraging shredding as an identity theft prevention step.  Another section focused on phishing and educating about what phishing is; not to be confused with fishing, except metaphorically of course. 

Protect yourself from Identity Theft! Safeguard your personal information. Verify requests for information. Shred documents using a cross cutting shredder.

In the age of the robocall and the internet, phishing and identity theft have become more sophisticated in that scammers can make the same automated call to many people at once and data security breaches expose consumers to widespread identity theft.   

Even with advances in technology, identity thieves can still obtain your personal information by rummaging through your trash and phishing.  To demonstrate, let’s take a quiz: 

What do you do with your expired credit card when a replacement arrives in the mail? 

A. Cut it down the middle and throw it out.  The card cannot be used once the magnetic strip is severed.  

B. Run it through a straight-line shredding machine. The card will be of no use when made into little strips.  

C. Cut it into as many small pieces as possible, either with scissors or a cross-cutting shredder. Throw out the pieces in different trash bags. It will be virtually impossible to decipher the card with it in so many pieces and places. 

D. Discard as it is.  Without additional instruction from the bank, no additional steps are necessary.  The card is of no use once it expires. 

My answer is C: Cut the card into a million pieces and discard in multiple places.  Why?  Because even though the card is expired, with card updates the card number stays the same.  Once a determined scammer has obtained the card, all they need to do is follow up with a strategic phishing phone call to you.  When they call, they may claim to be your financial institution and ask a series of phishing questions, which exposes other important numbers about the valid card in your possession: the expiration date and the CCV.   

What exactly is phishing?  

A. A sport of catching fish, using a fishing pole. 

B. A fun excursion with Vermont Phish Phans.  

C. The fraudulent attempt to obtain your personal information or data. 

D. Testing the water pH before ice fishing.  

Hopefully this quiz question was easier.  The answer is also C.   

Identity thieves phish for information about you, your Social Security number, your bank account number, your credit card and debit card numbers, your birthday, and more in order to use the information for their own financial gain.  When an email purports to be your bank, saying you have been locked out of your account and you must login using the enclosed link, a scammer hopes you provide them all of your personal information by completing their realistic-looking bogus form.  Once you have, they can access and use your account.  And, depending on the information you have provided, they may also open up new lines of credit in your name without your knowledge or consent.  Identity thieves have opened home loans, car loans and credit cards.  They usually don’t pay the bills they run up, creating a mountain of work for you to dispute debts you do not owe.  

Phishing scammers may contact you by email, phone, text message, and any other communication mechanism you use currently, including social media.  Phishing scams often present a problem that must be solved by you disclosing some personal information.  They may even pretend to be your computer company, warning about viruses that need to be repaired on your computer.  They offer to help you resolve your virus problem, if you grant them access to your computer and, unknowingly, your personal information stored on your computer.  Phishing scammers may also say a package will soon be delivered to you and you must reply if you did not order a product, or else your credit card will be charged. Then when you call, they ask for your credit card number. 

Protect yourself from phishing scams! Scammers claim to be someone you know. They present a problem that can only be resolved by providing personal info or money, they may contact you by phone, email, text, mail, and even social media.

Phishing scams can be tricky, because there are scenarios in which a bank institution may contact you, such as if there has been fraudulent activity on your credit card. Scammers take advantage of this and try to replicate it.  Rather than trying to determine the difference between a scam call and a call from your bank, take out the guesswork by disconnecting the contact and calling your bank directly on a number you know to be valid.   

Resist the impulse to reply to urgent requests of phishing scammers.  By slowing down and taking steps to verify, you can stop phishing scammers from reeling you into their trap. 

Help CAP prevent scams by sharing this information with your community.  Have a scam to report? Use CAP’s online scam reporting form. 

For more information about identity theft, visit our website. 

Help us stop these scams by sharing this information with those you care about. Get notified about the latest scams: Sign up for VT Scam Alert System alerts.  

Protect your Money from Scammers!

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Unfortunately, many scam encounters result in monetary loss in Vermont. In 2020, 249 Vermonters lost approximately $1.5 million to scammers. The most common scams associated with monetary loss were imposter scams (scammers posing as friends, family members, or romantic interests) and online classified listing scams (scams perpetrated on sites such as Craigslist or Facebook Marketplace). Scammers ask their victims to send money using a variety of methods, including gift card transactions, peer-to-peer payments apps like Venmo or CashApp, wire transfers, and cash or checks in the mail.  

Here are 5 things you can do to avoid experiencing a scam with monetary loss: 

  1. Don’t send money to someone you don’t know. This may sound simple, but it’s an important tip to remember. Take it slow. Scammers will pressure you to act quickly or face serious consequences. Do not provide unsolicited callers with your credit card or bank account numbers. If you are asked to send money via gift cards, wire transfer, cash in the mail, or peer-to-peer payment apps, it’s a scam.  
  1. Gift cards are for gifts and should be treated like cash. If you are asked to provide payment over the phone or via email using gift cards, it’s a scam. Typically, the scammer will ask you to purchase gift cards at a local grocery store or pharmacy, asking that you provide the numbers on the back of the card. In 2020, Vermonters lost approximately $128,000 to gift card scams (as reported to CAP). For more information about gift card scams, visit our Gift Card Scams blog post. 
  1. If it’s too good to be true, it’s not true. Scammers who perpetrate “free money” scams promise cash prizes, cars, and even grant funding in exchange for payment up front. Free money is always free. If you are asked to pay fees to receive a prize or grant, it’s a scam. 
  1. Scammers know exactly what to say. To get your money, scammers will often feed their victims  lines to use with bank clerks or cashiers in order to push through unusually large withdrawals, transfers, and purchases. They may ask you to say that the money is for a family member or a significant purchase to avoid suspicion from bankers and retailers.  
  1. Do not share personal or financial information with unverified contacts. Legitimate organizations and businesses will not call, email, or text you for your sensitive personal information. Scammers may claim there has been fraud and you need to verify your information – don’t take the bait. End communication with them and contact the associated business or organization using verified contact information.  

BONUS TIP: Look out for the scams below, which were associated with 95 of the 249 scam with loss reports we received in 2020: 

Imposter Scams / Phony Relationship Scams 

The scam: There is a wide variety of phony relationship scams. Sometimes, the scammer pretends to be someone you know, like a love interest, friend, relative, or even a religious leader. They typically reach out to you online or on the phone, claiming to need money.  

How to spot the scam: They ask you to send money immediately, often in the form of wire transfers or gift cards. If you met the person online, but they refuse to video-chat or talk on the phone.  

What to do: If they claim to be someone you know, call the person using a verified phone number. If you receive a suspicious email, be sure to double-check the email address. If you’re feeling suspicious, get the real story and talk to someone you trust. Cut off communication with the scammer. If you receive an email from a friend or coworker asking for money, do not send money. Be sure to call that person directly—it’s most likely a scam. 

Online Classified Listing Scams 

The scam: Sometimes the scammer responds to a seller post, overpays with a check, and asks for the remainder to be wired back. Sometimes the post is for a fictitious rental property and the scammer is looking for the deposit and first month’s rent to be sent immediately. Scams even happen when you are looking for that perfect puppy or pet to expand your family, but the transport of the animal is supposedly held up at the airport or elsewhere. 

How to spot the scam: If you feel suspicious, stop the sale or purchase. The scammer may ask you to wire them money, send a bank transfer, or pay using gift cards. They may not want to talk on the phone or meet in person. Remember, you should not provide a rental deposit before signing the lease or contract in-person. 

What to do: Complete your transactions in cash and preferably in-person. If they refuse to meet in-person or talk on the phone, ignore them and end communication. 

For more information about avoiding monetary loss and fraud, visit the Federal Trade Commission’s website:  

Have you experienced monetary loss due to a scam? Report it to CAP:

Call (800) 649-2424 OR Complete the Vermont Attorney General’s scam reporting form. 

Contributing Writer: Madison Braz

Content Editor: Crystal Baldwin