Cryptocurrency Lawyers

The rise of cryptocurrencies such as Bitcoin, Ethereum, and Ripple has been one of the biggest financial stories in recent years. But for every investor who’s become a crypto millionaire, there are countless others who have lost money on volatile digital coins, or been defrauded by cryptocurrency investment schemes.

Weak investor protections, wild price swings, and promises of high investment returns make the cryptocurrency market ripe for scams. If you had the misfortune of falling prey to a cryptocurrency fraud, prompt legal action may help you recover your losses.

What is Cryptocurrency?

With the creation of Bitcoin in 2009, cryptocurrency burst onto the scene, threatening to undercut institutional banking power and decentralize the financial system. Since then, the cryptocurrency market has grown exponentially. Today, there are thousands of cryptocurrencies. Some, such as Bitcoin, are accepted for a wide variety of financial transactions. Others have niche applications.

Some basic facts about cryptocurrency are as follows:

• Cryptocurrency is digital money. There is no physical coin or bill.
• Cryptocurrency is not backed by a government, and therefore does not have government protections, such as deposit insurance.
• Cryptocurrency transfers do not require a bank or other go-between institution. Cryptocurrency is stored, sent, and received using a digital wallet.
• Cryptocurrency is bought and sold on a currency exchange. Leading exchanges include Coinbase, Kraken, Gemini, and Binance.
• Virtually anyone can create a cryptocurrency.

Learn more about cryptocurrency from the Federal Trade Commission.

Cryptocurrency Volatility and Scams

Cryptocurrency is virtual money, but cryptocurrency fraud and devaluation can—and often do—lead to losses of real money.

A defining aspect of cryptocurrency is sudden and extreme price fluctuations. A coin’s value can change drastically by the year, the month, the week, the day, and even by the hour.

In 2018, Bitcoin’s price fell by more than 76 percent. Then, in 2019, its price jumped by more than 15 percent in a single day, adding over $14 billion to its market value within 24 hours. Later in 2019, after reaching a 17-month high of nearly $14,000 per coin, Bitcoin’s price dropped back near $7,500 just three months later. Such trends are the norm—not the exception. In 2017, Bitcoin’s value jumped from around $1,000 per coin to nearly $20,000 per coin in December 2017. Two months later, Bitcoin plunged back below $8,000. Many suspect that the prices of Bitcoin and other cryptocurrencies are often illegally manipulated by those with large holdings.

Indeed,, the “Wild West” atmosphere of cryptocurrency lends itself to fraudulent schemes that take advantage of unsuspecting investors looking to profit from the “digital gold rush.”

According to Investopedia, $9 million is lost each day in cryptocurrency scams. Common types of cryptocurrency scams include:

• Fraudulent Initial Coin Offerings (ICOs): An Initial Coin Offering is a way for individuals or companies to raise money for a new cryptocurrency by offering coins in exchange for money. Fraudsters may tout an ICO “investment opportunity” that is nothing more than a scam to steal your digital coins or wallet.
• Fraudulent exchanges and wallets: There are hundreds of exchanges where cryptocurrency can be bought and sold. A common scheme is to set up fake exchanges. Fake wallets—often clones of legitimate wallets—are also common.
• Ponzi schemes: Ponzi schemes have been around for almost a century. Virtual currency Ponzi schemes are a new twist on an old trick.
• Phishing scams: Like other types of phishing scams, hackers may try to obtain your personal information in order to steal cryptocurrency from you. One of the most popular tactics uses fake Airdrops.
• Impersonation: This type of crypto scam uses fake social media accounts that impersonate real crypto businesses or executives, then make an effort to defraud or compromise others. Scammers may also pose as crypto exchange support staff.

Learn about other types of scam from the official Bitcoin site.

Protect Yourself From Cryptocurrency Scams

Due diligence and a healthy dose of skepticism can help to avoid many cryptocurrency scams. The FTC warns investors to look out for:

• Guaranteed returns on your investment
• Promises of big payouts in a short time
• Free cryptocurrency offers

If you have suffered significant losses from a crypto investment scam, the Business Trial Group can help recover your losses. We handle all investment cases on a contingency-fee basis, so you pay no upfront fees, and no fees at all unless we recover money for you. Contact the Business Trial Group for a free investment loss case review.