The Good

Cryptocurrencies (Crypto) such as Bitcoin, Ethereum, Litecoin, and hundreds more are hot commodities in online trading, and it’s possible for a smart investor to make a big profit[1].

The Bad

The prospect of quick riches can blind individuals to the risks and enable scammers to lure them into a fraud scheme. Cryptocurrencies are not backed by the full faith and credit of any government or central bank, and their values change constantly. Crypto can be volatile, with market sentiment causing sharp and sudden price fluctuation.

Crypto blurs the good and bad lines and can increase your risk. “Crypto” can be used to buy goods and services, exchanged for U.S. dollars and other conventional currencies on digital markets, and even obtained at specialized ATMs. Crypto is capitalism at work (risk vs. reward), and the value of virtual currencies is driven entirely by supply and demand. At this time, Crypto investments allow an opening for fraud and theft of assets because they are operating ahead of regulatory protections afforded to traditional financial products like stocks, bonds, and mutual funds.

The Ugly

In the ACFE 2022 Report to the Nation[2], 2,000 cases were studied from 133 countries and 23 industries, and only 8% of the frauds in the studies involved Crypto. ACFE proposes the numbers will rise significantly in the future. As Willie Sutton, a famous bank robber said, he robbed banks because “that’s where the money is.” Crypto robbers will follow because Crypto is where big money is, and there is less regulation.

The Federal Trade Commission (FTC) advised that crypto payments do not come with legal protections like your credit card. Crypto payments are not typically reversible; therefore, the buyer’s obligation is to KYC (know your customer). A Crypto purchaser does not usually have a means of getting their money back. Cryptos are being found in bribery and kickback schemes, drug dealing, human trafficking, money laundering, conversion of misappropriated assets, and assets hidden in divorce cases.

The FTC Consumer Sentinel Network 2021 Report [3] dated February 2022 received 5.7 million fraud reports with $5.9 billion in fraud loss. With younger people aged 20-29 losing 41% more than the elderly aged 70-79 losing 18%. From 2020 through 2021, they received 6,800 complaints of cryptocurrency investment frauds with over $80 million in losses. The 2022 report showed that Crypto reports were up to 38,711 complaints, with the reported losses growing to $750 million.

AARP states, “for cryptocurrency’s high-tech gloss, many of the related scams are just newfangled versions of classic frauds,” with Bogus Websites, Celebrity Endorsements, Pump & Dump, Ponzi, and Romance Scams. The methods of defrauding victims are the same, but the amount of money being stolen is growing exponentially.

If your law firm requires a private investigator or forensic accountant regarding cryptocurrency, hidden assets by high net worth clients, identity theft, or identity fraud matter, contact Chief Investigator Edmond Martin of Sage Investigations, LLC at 512-659-3179 or email him at edmartin@sageinvestigations.com. We offer a free 20-minute consult. Visit our website at www.Sageinvestigations.Com. Click to read about our team and their CVs.

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[2] ACFE 2022 Report to the Nation
[3] FTC Consumer Sentinel Network 2021 Report