Be aware of the risks when dealing with cryptocurrencies

Investors should always be wary of investment opportunities that sound “too good to be true”, but new opportunities in cryptocurrency can be particularly difficult to assess for risk. The Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) and the Wisconsin Department of Financial Institutions (DFI) warn consumers to beware of scammers and thieves when investing in cryptocurrency.

Cryptocurrency is a computer-based digital currency designed as a monetary system in which individual coin ownership records are stored in a ledger that exists in the form of a computerized database. This database or blockchain uses strong cryptography to secure transaction records, control the creation of additional coins, and verify the transfer of coin ownership. Examples of cryptocurrencies are Bitcoin, Ethereum, Dogecoin, Litecoin, Binance Coin XRP and Tron. These cryptocurrencies are often available through a crypto exchange such as CoinBase or Binance.

“Investing in cryptocurrencies may sound like exciting opportunities, but they can also involve significant risks. Consumers should be careful and do their research when considering investing in cryptocurrency, ”suggests DATCP Secretary Randy Romanski. “Investors should also take care to protect their cryptocurrency keys, seed phrases and the exchange of account information to prevent theft.”

“Cryptocurrencies do not yet fit in perfectly with the existing state and federal regulatory framework, so it can be easier for promoters of these products to cheat you,” said DFI Secretary Kathy Blumenfeld. “If you do decide to invest in a cryptocurrency or related product, be prepared that some or all of the funds invested may be lost. Cryptocurrency investments are not recommended for retirement investments or with money that you cannot afford to lose. Before making any financial decisions, do your homework, ask questions, and contact DFI’s securities division with questions about the product or the person selling it.

Some concerns about cryptocurrency are:

Cryptocurrency deposit accounts

In contrast to conventional savings accounts, interest-bearing crypto asset and cryptocurrency accounts carry great risks. A growing number of companies are offering “deposit” accounts that operate with a seemingly simple promise to pay high interest on cryptocurrency deposits. However, investors should know that cryptocurrency transfers can be undetectable and irreversible. If you withdraw the money invested, you run the risk of being scammed. Neither the FDIC nor any other government agency insures deposits in interest-bearing cryptocurrency accounts.

Beware of SIM swapping

If a hacker has stolen personal information like your name, email address, account information, and phone number, they can initiate a SIM swap and delete your cryptocurrency accounts. This starts when the hackers contact your carrier to change the SIM card identity (like they did when upgrading your phone). When the SIM card is replaced, another phone is activated to act as the phone associated with your phone number. Then the hacker resets the passwords for your cryptocurrency accounts using two-factor authentication texts. Once they reset your accounts, they can transfer all of your coins to themselves. Once these transactions are completed, they are without a trace and irreversible. You lose your initial investment and all profits. Even reputable cryptocurrency companies cannot reverse crypto transfers sent by their platform. Unlike traditional banks or credit card companies, once confirmed on the blockchain, cryptocurrency transfers are permanent.

So what can you do to protect yourself from cryptocurrency-related scams?

  • Research all investments before making financial decisions. DFI encourages investors to do their homework, ask questions, and contact DFI’s securities department at (608) 266-2139 or email DFISecurities@dfi.wisconsin.gov for more information.
  • Contact your mobile operator to see if they have a phone number blocking service that will prevent your phone number from being transferred to another phone without additional security measures.
  • Be wary of guarantees and big promises. Scammers often promise that you will make money quickly, or that you will get large payouts or guaranteed returns. They may be offering you free money that is paid for in cash or in cryptocurrency. Don’t buy it.
  • Check your credit report frequently search online for evidence of identity theft at annualcreditreport.com. If criminals have access to your personal and account information, they can steal your money and investments.
  • Check the DATCP website for data breaches, If you have been the victim of a data breach, you may be eligible for identity theft protection services. https://datcp.wi.gov/Pages/Programs_Services/DataBreaches.aspx

For more information or to file a consumer complaint, email datcphotline@wi.gov, call (800) 422-7128, or visit https://datcp.wi.gov/Pages/Programs_Services/FileConsumerComplaint. aspx.

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