Scams pose a real threat to crypto investors

Local News

Wisc. (WLAX/WEUX) – The interest in cryptocurrency is on the rise, and so are the number of online scams targeting would-be investors.

When you think about money, a crisp dollar bill, or the loose change in your car might come to mind. While many of us focus on what’s in our wallets, others are placing their financial future on something that’s not always easy to grasp.

Cryptocurrency is a computer-based digital current designed to be a monetary system where exchanges are handled online between private parties.

Micheal Domke, director of Consumer Protection, said, “With cryptocurrency, all of this is stored on what’s called a ledger, and there’s a level of cryptography that basically encodes both the sender, the receiver, and the actual transaction information.”

Bitcoin was the first cryptocurrency and was developed in 2009. Now, there are more than 7,000 in existence. With so many to choose from, their value continues to grow.

“As of November 2021, this year, there was over 18.8 million bitcoin in circulation, with a total market value of about 1.2 trillion dollars.”

Robin Jacobs is the division of securities director for the Wisconsin Department of Financial Institutions. She says that growth is one of the things that makes the crypto market so volatile. Another concern is a lack of cryptocurrency regulations.

“The IRS taxes bitcoin as property, the CFTC considers cryptocurrency to be a commodity.”, said Jacobs.

The volatility brings with it an increased risk of substantial financial losses.

“Since October of 2020, the reports of fraud have skyrocketed, with nearly 7,000 people reporting losses of more than 80 million dollars on these scams.”

Both Jacobs and director of the Wisconsin Bureau of Consumer Protection Michael Domke say there are some clear signs investors can look for to avoid being scammed.

“if you’re being solicited through an unknown email that says hey, we’ve got this new crypto and we’ll offer you this incredible deal that’s going to double your money, or guarantee returns, those are the things you definitely want to shy away from.”, said Domke

Even though its increase in popularity has led to an increase in fraud, Domke doesn’t see cryptocurrency’s momentum slowing down.

“We’re seeing sports figures, actors, everybody promoting this, that in itself to the public creates an air of legitimacy.”

Domke says the best way to invest safely is to extensively research the cryptocurrency that you’re interested in. Anyone who experiences cryptocurrency fraud can report it to the Federal Trade Commission or can contact the Wisconsin Department of Financial Institutions. 

Copyright 2021 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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