Financial Education Resources

Have you ever been scrolling through your social media newsfeed and noticed a post about cryptocurrency (crypto)? They usually depict a successful crypto investor who wants to teach you about it and help you invest in it.

Maybe you are curious about crypto, so you begin searching the web for information about it. Suddenly, you begin receiving emails about investing in crypto. Wow! How cool is it that they reached out to you about becoming an investor?

While it’s tempting to connect with that person and start raking in cash immediately, it’s important to slow down and evaluate the post, the person posting, and any other information that could lead to fraud.

What Is Cryptocurrency?

Cryptocurrency is a digital currency like bitcoin, which allows users to send and receive money without identifying themselves.

Cryptocurrency is supported by a technology known as blockchain, which maintains a tamper-resistant record of transactions and tracks ownership. Each cryptocurrency user has a public key like a bank’s routing number and account number, and a private key which is similar to a username and password.

Types of Cryptocurrencies

Cryptocurrency is available as coins or tokens. Coins are more like traditional money, while tokens generally represent assets.

The first cryptocurrency introduced was Bitcoin and it remains one of the most commonly traded. Ethereum is the second most valuable cryptocurrency and can be used for complex transactions.

Is Cryptocurrency Safe?

Unlike traditional currency, cryptocurrencies are not backed by a government or financial institution. This is considered an advantage to some who want to maintain privacy and enjoy restriction free transactions. However, they are not insured, so if you lose your wallet, you lose your entire cryptocurrency investment.

Losing your digital wallet seems far-fetched, but it can be as easy as a keystroke. Scammers are always finding new ways to steal money using cryptocurrency. In 2023, estimated losses from crypto fraud totaled more than $5.6 billion, as cited by IC3, a division of the FBI.

Prevent Fraud

Crypto’s instant transactions, portability, and international reach means it can be an appealing target for scammers.

1. Bitcoin Investment Scams – Scammers will pose as seasoned investors and request a fee or access to a victim’s funds.
2. Rug Pull Scams – Fraudsters will set up a project and wait for the value of the project to be pumped up before “pulling the rug” and stealing as much of the value as they can.
3. Phishing Scams – Phishing involves sending a victim a fake website link that will request personal details usually containing crypto wallet information or a private key.

Follow these steps to avoid becoming a victim of a cryptocurrency scam:

1. Watch out for promises of huge returns on crypto investments. Like other investments, crypto is hard to predict, so any claims to get rich quickly are almost always scams.
2. Research investments thoroughly. Whether you are investing in crypto or non-fungible tokens (NFTs), it is important to validate all potential investments. Find as much information as possible about the project or cryptocurrency that you want to invest in. Be sure to find out who created the project and if they are reputable.
3. Always avoid clicking on links from unknown senders. If the link appears to be sent from someone you know, double check the email address carefully.

Remember, if something looks too good to be true, it probably is. Avoid becoming a victim of fraud by looking for red flags with emails, links, potential purchases, and all communications associated with your finances.