OMAHA — Growing demand for cryptocurrency, an unregulated marketplace and a public largely unfamiliar with the digital tender have created fruitful conditions for scammers.
The Better Business Bureau has observed a marked increase in crypto-related complaints, prompting it to conduct a .
The BBB found that incidents concerning cryptocurrency submitted to its online “Scam Tracker†tool exceeded 1,200 in 2021, encompassing almost $8 million in losses. That represents a tripling of reports collected from 2019 to 2021 and a tripling of monetary losses within just two years.
“The numbers were, frankly, astonishing,†said Omaha BBB spokesman Josh Planos. “It’s an industry right now that is ripe with fraud and con artists.â€
Cryptocurrency is a form of digital money that, through encryption technology, enables anyone to send and receive payments, but because it operates outside of the banking system, it lacks the consequent protections.
The most popular cryptocurrency, Bitcoin, was developed in 2009, but many more have been released in the years since.
Use has skyrocketed in recent years, leading to innovation and novel investment opportunities, a trend of which Nebraska lawmakers have taken note.
Last year, the Legislature passed the Nebraska Financial Innovation Act, which enables the establishment of “digital asset depository institutions,†which will be supervised by the Nebraska Department of Banking and Finance.
But the introduction of cryptocurrency also has created additional chances that people will fall victim to scams, schemes and fraud.
“We have this idea that we have this safety net on us at all times,†Planos said. “There is no safety net.â€
Entities, including the Federal Trade Commission and FBI, have reported findings similar to the BBB’s study. Using different methodologies, the FBI recorded a nearly 550% increase in financial losses associated with cryptocurrency crimes from 2020 to 2021, totaling more than $1.6 billion.
The FBI identified 97 victims in Nebraska, with losses in excess of $4.2 million, according to the agency’s Internet Crime Report.
Earlier this year, the Nebraska Department of Banking and Finance highlighted cryptocurrencies and other digital assets as the state’s “top investor threats.â€
In one instance, an online crypto-mining investment company was barred from selling securities in Nebraska in 2021 after it obtained $725,000 from an investor and her mother.
The company had promised the woman large returns on a cryptocurrency investment, but it required her to submit hundreds of thousands of dollars in fees to withdraw the dividends.
Her concerned broker-dealer reported the situation to the state under a law passed earlier in 2021 intended to protect elderly Nebraskans and other vulnerable adults from financial exploitation. It enables broker-dealers and investment advisers to pause transactions and notify state officials.
The essence of cryptocurrency — its untraceability — and the general public’s lack of familiarity with it make it attractive for scammers.
Most schemes are advertised on social media, but the methods of conning people are tried and true, such as Ponzi schemes, romance scams and ransomware.
“It’s so early in this that folks shouldn’t be requesting payment with cryptocurrency for products,†Planos said. “Most businesses are not asking for any payment in crypto.â€
Planos recommended that people research the reputations of crypto companies before forking over their cash.