California regulator introduces new tracker for crypto scams

A California regulator has launched a crypto scam tracker based on complaints from consumers and investors.

The database, available via the Department of Financial Protection and Innovation’s website, has 36 entries since launching on Feb. 16.

The department’s list includes scams involving fraudulent behaviour of all different kinds.

One of the most prominent is what the watchdog calls a “Pig Butchering Scam.” Think the Tinder Swindler, but for crypto. “In this case, a scammer may use a variety of methods to establish a relationship (either social, romantic, or business focus), and then gain the victim’s confidence and gradually introduce the victim to a fraudulent investment opportunity.”

In most of the cases on the site, four-fifths, people fell victim to this scam by trusting people they thought they knew into making investments on their behalf.

Other common types of crypto scams to look out for

Phishing scams

  • In May 2021, cybercriminals sent fraudulent emails to Binance users, claiming that their accounts had been locked due to suspicious activity and asking them to click on a link to unlock their accounts. The link directed users to a fake Binance login page that looked identical to the real one, but instead, the users’ login credentials were stolen. (Source: Binance)
  • Early this week, MetaMask warned users against Namecheap phishing email, after its email service provider Namecheap confirmed that its email account was breached on Feb. 12 — due to a compromise in its upstream system provider. (Source: CryptoSlate)

Ponzi schemes

  • In 2019, the founders of the cryptocurrency project BitClub Network were arrested for running a $722 million Ponzi scheme. The project promised investors high returns from mining cryptocurrency, but in reality, the founders were using new investors’ funds to pay out old investors. (Source: CNBC)
  • That same year saw the collapse of OneCoin, the cryptocurrency launched in 2014 by the Bulgarian born business woman Ruja Ignatova. In 2016, the Central Bank of Samoa issued a warning about OneCoin being a pyramid scheme, and other countries such as Germany, Italy, and Hungary also launched investigations into the project. In 2017, the Bulgarian authorities raided OneCoin’s headquarters and arrested several people associated with the project. As of February 2023, Ruja Ignatova is still missing and the fate of the OneCoin investors remains uncertain. (Source: CryptoSlate).

Fake exchanges and social media profiles

  • In 2018, scammers created a fake version of the cryptocurrency exchange Binance and used Google Ads to promote the fake site, which looked identical to the real Binance site. The scammers stole users’ login credentials and funds. (Source: The Next Web)
  • According to a report by the US Federal Trade Commission (FTC) published in June 2022, scammers have made away with as much as $1 billion worth of cryptocurrency since 2021. The report also revealed that almost half of all crypto scams were initiated through social media platforms.

Malware attacks

  • In 2017, the WannaCry ransomware attack infected hundreds of thousands of computers worldwide, including some used for mining cryptocurrency. The attack demanded payment in Bitcoin, which was used to facilitate the transfer of funds to the attackers. (Source: BBC News)
  • In 2020, a malware attack targeted users of the cryptocurrency wallet Electrum. The malware created a fake update that prompted users to enter their private keys, which were then stolen by the attackers. (Source: ZDNet)

The new California scam tracker includes a search feature that empowers users to proactively research potentially deceitful websites or cryptocurrency ventures.

It adds that if any entity thinks they have been unfairly put on the list, to contact the DFPI.


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