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Cryptocurrency a big target for scammers in 2022

Posted at 5:30 AM, Jan 21, 2022
and last updated 2022-01-21 13:16:15-05

PHOENIX — Cryptocurrency is growing in popularity but how do you know the money you are investing is safe?

In the simplest form, cryptocurrency is digital money that you can buy and use to pay for goods and services. You can also invest in it like the stock market. Bitcoin is one of the most popular.

It's different than anything we've known before, therefore it's confusing for some.

"[Cryptocurrency] really eliminates the need for an intermediary or middleman," said Hailey Lennon, a Partner at Anderson Kill; a firm that has represented big names in the cryptocurrency industry.

She says eliminating middlemen, means less oversight, making it harder to enforce regulations. A perfect storm for scammers.

In 2021, more than $14 billion in crypto was lost in scams, an 81% increase just since 2020.

Many scams try to get you to invest, like one called the "Rug Pull".

You're pushed to buy tokens and told they'll increase in value. Instead, only the scammers, who own a majority of the tokens, benefit when they sell at the peak.

"The price of the of the token that the other holders, the minority holders of those coins have plummeted to zero and people are out of a lot of money," said Lennon.

We saw that exact thing play out with the cryptocurrency "Squid," which gained popularity after the release of Netflix's Squid Games series.

It began trading for a penny but was quickly worth more than $2,800 a coin. However, the anonymous people behind it cashed out taking an estimated $3.8 million and leaving more than 40,000 people with a worthless digital account.

The growth of these scams has many people questioning are these safe investments and how can you spot fake ones.

The number one giveaway is the promise of getting rich quickly. Like many investments, cryptocurrency is unpredictable. So, no one can promise you a specific return on your money.

Also, true investments will never ask for you to send them coins in order to validate your address - only scammers will.

"It really is an industry where you have to, you know, fall down the rabbit hole, really start to understand the technology," said Lennon.

She says as of now, in the U.S., the Department of Treasury regulates cryptocurrency, but enforcing those regulations falls to a number of different agencies depending on how the crypto is used, something she says may change in the coming years.