The Oregon Division of Financial Regulation (DFR) has issued a warning for cryptocurrency investors about the prevalence of scammers.
DFR officials say that many crypto trading apps or websites are just fake platforms set up by scammers to take investor money and give nothing in return. With these fraudulent trading platforms, investors are promised huge returns but will not be able to withdraw funds without having to deposit more money in “withdrawal fees” or “taxes.” The scammer will continue extorting these fees until an investor becomes suspicious, but then the account is drained, and the scammers are gone.
DFR warns investors that they should do their research before transferring money to a crypto trading website or app.
A recent scam involved a website claiming to be managed by the U.S. Department of State, stating it was working on getting FTX customer assets returned to them. The website asked for the investor’s FTX username and password, along with other account information. The U.S. Department of State did not create this website.
“The crypto trading market is fluid and full of people trying to take advantage of you,” TK Keen, DFR administrator, said. “We have said this before, but if it sounds too good to be true, it probably is. We encourage everyone to do their homework and invest wisely, and be diligent in protecting their usernames, passwords, and other sensitive data.”
Among other common schemes, fraudsters create fake digital wallets to lure users into providing their private key or code that enables the wallet to open. Once scammers receive the private key, they can steal all the cryptocurrency from the owner’s digital wallet. There are also pump-and-dump schemes, where groups of individuals coordinate to buy a thinly-traded cryptocurrency, promote the cryptocurrency on social media to push up demand and the price, and then sell it in a coordinated sale. After the price plummets, those unaware of the scheme are left with the devalued cryptocurrency.
“Many of these seem obvious after the fact, but there is so much in this industry that looks and sounds legitimate,” Keen said. “Unfortunately, there are a lot of people out there in the crypto space who are just looking to take advantage of you. If you think you are a victim of a crypto-related scam, we encourage you to file a complaint with our office.”