Common cryptocurrency scams and how to avoid them

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Metro Manila (CNN Philippines) — Is cryptocurrency a scam? It isn't, but you should still be careful with fraudulent schemes that ride on its popularity. Cryptocurrency is a volatile enough investment as it is. Don't fall prey to these common cryptocurrency frauds.

Scam No. 1: Fake cryptocurrencies

A common scam is presenting a new cryptocurrency as an alternative to popular digital monetary currencies like Bitcoin. Fraudsters would lure victims into believing it's too late to cash in on Bitcoin, and they will introduce a fake cryptocurrency.

In the United States, the people behind My Big Coin were charged for running an elaborate cryptocurrency scam that defrauded at least 28 investors out of six million dollars. Authorities learned the victims were asked to invest in fake cryptocurrency, not knowing the funds were re-directed into the fraudsters' bank accounts.

Scam No. 2: Giveaway Scam

On June 11, 2020, hackers took over accounts belonging to well-known figures like Barack Obama, Elon Musk, and Bill Gates in an apparent effort to earn income by scamming people out of Bitcoin.

Known as 'Giveaway Scam,' hackers used the personalities’ verified accounts to encourage people to send Bitcoin to a digital wallet and promise to send back double the money in return. It's often done under the guise of wanting to give back to a community or followers. But, instead, the fraudsters make off with the money.

This also happens with impostor accounts that make it seem like it was the prominent person saying it. The first rule is always to question tweets or posts that ask to have cryptocurrency transferred to a digital wallet. It is also safer to stay away from the post for a week until you learn that the post is legitimate.

Scam No. 3: Ponzi or pyramid scheme

In April 2018, Arnel Ordonio and his wife Leonady were presented before some 50 victims in Camp Crame, all demanding the return of their money. The suspects were captured in an entrapment operation in Vigan City. Police said the Ordonios rode on Bitcoin’s popularity, promising people easy money and luring them into investing in their business.

The PNP described the scam as similar to pyramid schemes, but with the use of electronic money. Investors were promised at least 30% profit in about half a month for a minimum bankrolled capital of P90 thousand. Some of the investments went as high as P29 million.

To protect your hard-earned money from cryptocurrency scammers, the Securities and Exchange Commission (SEC) has advised the public not to transact with entities not registered with the SEC.

Scam No. 4: Cookie-cutter websites

In March 2020, the SEC advised the public against the unregulated entity 'Bitcoin Revolution,' which is found to be using the domain 'the-bitcoinrevolution.com' to solicit investments in the country. The SEC added that the entity is notorious for using fake celebrity endorsements online, including Senator Manny Pacquiao, Former Senate President and House Speaker Manny Villar, and Boy Abunda, to entice Filipinos to invest in its scheme. The Bitcoin Revolution claims to offer a unique automated trading system or platform, promising a success rate of as high as 99% per transaction.

'Bitcoin Revolution' also claimed some of its traders became millionaires in less than two months by simply investing in its scheme, which SEC described as "too good to be true."

The SEC warned the public to be wary of red flags that are possible indications of a Ponzi Scheme. Despite operating with the use of cookie-cutter websites similar to cryptocurrency scams, the SEC also noted that the scheme of 'Bitcoin Revolution' is synonymous with offering and selling securities in the form of investment contracts.

Scam No. 5: Malware

Hackers use malware to get your passwords and personal data. They have also targeted cryptocurrency wallets when they are connected to the internet. Be wary of clicking suspicious links in your email or downloading files from sites and social media. Some fraudsters also deceive victims by posting about websites where they claim individuals can mine bitcoins for free. Stay alert when seeing posts that are too good to be true.

Don’t be a victim of cryptocurrency scams

Scams are everywhere online. Fraudsters ride on the digital monetary mechanism’s popularity to prey on the people's vulnerability towards the get-rich-quick schemes. Report suspicious investment schemes to the Enforcement and Investor Protection Department of the SEC through e-mail at [email protected] or through landline (02) 8818-6337. Under the Securities Regulation Code, those who act as salesmen, brokers, dealers, or agents of fraudulent investment schemes may be held criminally liable and penalized with a maximum fine of ₱5 million or imprisonment of 21 years, or both.

For suspicious online messages, report these incidents to the PNP Anti-Crime Group through its website at www.pnpacg.ph, through hotline number at (02) 8723-0401, or through email at [email protected].

You may also report suspicious messages to the NBI Anti-Fraud Division at (02) 8525-4093 or e-mail at [email protected]. Alternatively, you may also send a message through the NBI’s website at www.nbi.gov.ph or their official Facebook account.

Where to Invest

While warning the public against fraudulent investment schemes, the government still encourages investing in safe and secure opportunities.

One of the safest examples is government bonds. These bonds are safe, secure, and contribute to projects that would benefit the country.

The government is also pursuing reforms to ease and simplify investing in legitimate opportunities. The Duterte administration's proposed Passive Income and Financial Intermediaries Taxation Act (PIFITA) will simplify the tax regime for bonds and stocks by reducing the number of tax rates on financial transactions from 80 to 36. Once enacted, PIFITA will make it easier for everyday Filipino investors to invest in safe and secure opportunities.