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Rip-off with cryptocurrencies like Bitcoin or Ripple

Up and down it goes for Bitcoin, Ethereum or Ripple: The course of the prices of these cryptocurrencies resembles a roller coaster ride. Fraudsters don’t care: investors in America or England, who only want to see the shine of digital money, are welcome victims for them. We tell you how to avoid rip-offs and scams.

“Unfortunately, consumers who have fallen for digital scams involving cryptocurrencies and lost amounts, some of which are in the five-digit range, keep coming to us,” says Ralf Scherfling, a research assistant in the Finance and Insurance Group at the Consumer Advice Center North Rhine-Westphalia in Germany. Often, the scammers approach their victims on social networks. They always entice with the high returns that are possible through an investment. And in times of low interest rates, many investors are only too happy to believe in the story of quick money multiplication.

Old rip-off in the new crypto shine

“The fact that the offers are often non-transparent and the business models incomprehensible obviously doesn’t matter to some,” says Scherfling. This, however, is not new, he adds. “We have also known the methods of the crooks for many years,” says Scherfling. For example, there are now pyramid schemes related to investments in Bitcoin, Ethereum and Ripple. In the process, investors are supposed to constantly attract new participants to the product, allegedly in order to achieve the highest possible return. The consumer advice center has provided even more information on the Internet on the subject of investing in cryptocurrencies, which is also interesting for investors in America or England.

Raking in money with made-up stories

There are also scammers who use made-up stories to get their victims to pour money in again and again – and then disappear with it. “In these cases, scammers set up trading platforms on which so-called contracts for difference are concluded. These are highly speculative contracts for difference,” says Carsten Rust of the police in Cologne, North Rhine-Westphalia. Here, investors speculate on the price development of a certain underlying asset, for example, a share or even a cryptocurrency.

Bitcoin in digital environment.
Bitcoin, Ethereum and other coins: there are numerous scams with cryptos.

Celebrities abused for crypto advertising

The platforms also lure new customers in America or England with fake articles on the Internet, among other things. In these, for example, celebrities are mentioned who are supposed to have become rich via these platforms. However, according to Rust, the investors have no chance of winning at all. This is because the platforms are only designed to make it easier for the fraudsters to get their hands on their victims. Often, the alleged investment advisors also get in touch by phone, urging further deposits. “The money is gone immediately, a total loss of assets is not uncommon,” says Carsten Rust. The European Consumer Center has to the so-called CFD platforms even more information on the Internet.

The Austrian Financial Market Authority (FMA) also reports a rip-off method on its website: job seekers are apparently hired as “junior traders”. Their task is to convert sums of money that come into their account into cryptocurrencies. Behind this, however, is nothing more than – punishable – money laundering.

Unfortunately, consumers who have fallen for fraud with cryptocurrencies report to us again and again.

Ralf Scherfling, research assistant in the Finance and Insurance Group at the Consumer Advice Center North Rhine-Westphalia

FAQ – Frequently Asked Questions

How can you recognize reputable investment opportunities in cryptocurrencies?

Cryptocurrencies are not dubious per se. If you want to invest in Bitcoin, Ethereum or other cryptocurrencies, you should look for a reputable platform that works together with a bank or exchange if possible. Before signing a contract, you should search the Internet for other customers’ experiences with this service provider, for example.

For whom is the investment in cryptocurrencies suitable?

The prices of cryptocurrencies fluctuate greatly. So, as an investor, you can also lose money without having fallen for a scammer. You should never invest your entire fortune in cryptocurrencies. If you have some spare play money and look for a reputable contract partner, you can gain experience with cryptocurrencies – and perhaps make a profit in the long run.

How to recognize a scammer when buying cryptocurrencies?

Be especially careful if you get a very lucrative offer from someone you don’t know and they didn’t ask for it. Pay attention to the imprint. Use your common sense and check with independent consumer advocates or investment advisors.

Recognize dubious investment opportunities

Anyone who wants to trade in cryptocurrencies without being ripped off should therefore pay attention to a few points. This includes, for example, the method of contact: “It is better not to respond to investment offers from someone who you have never allowed to contact you. It does not matter whether these come by e-mail, via social networks or by other means. Often, this is nothing more than cybercrime,” says Ralf Scherfling. In this context, it can be helpful to ask yourself whether you would entrust your money to a stranger on the street who promises you a high return. “Anyone who gets involved in such a contact often knows just as little about this person as they would about a stranger. Not even whether this person really exists,” says Scherfling. Even evaluations on the Internet are not necessarily meaningful, he said. “After all, you don’t know how these came about. In other words, who wrote them and why.”

A look at the imprint is worthwhile

In addition, one should deal with the business model: Do you understand it? Of course, there are also complex business models that are serious. But if you don’t understand how your invested money yields returns, then it makes sense to ask a professional for advice. In addition, it is always good to take a look at the imprint: If there is none, or if the company is located abroad, it will be difficult to retrieve the transferred money in case of doubt. Therefore, in such a case: Hands off!

Scherfling’s tip: “In Germany, interested parties should check whether the company is registered with BaFin, the Federal Financial Supervisory Authority.” This is the case, for example, with the app Bison, which belongs to the Stuttgart Stock Exchange. Through it, investors can buy and sell Litecoin, Bitcoin or Ethereum. Or with the Nuri platform, formerly Bitwala, which belongs to Solarisbank. On BaFin ‘s site, you can search for banks licensed in Germany, but also some with cross-border services from Austria and Switzerland. Authorized institutions in Austria can be found on the site of the FMA. Swiss banks are best served by looking at the Finma site.

Questions investors should ask themselves

  • You are contacted unsolicited by a person you do not know who offers you an investment in cryptocurrencies? Be wary.
  • The promises of returns sound too good to be true? Contact an independent advisory service.
  • Where is the company you want to entrust your money to located? If the imprint is missing on the associated website, or if the company's headquarters are abroad, you should look for another investment.

Bettina Blass

Business Journalist & Editor | Consumer Specialist.
Main focus: Economy | Consumer Protection | Internet

Bettina Blass

Wirtschaftsjournalistin & Redakteurin | Verbraucherspezialistin
Schwerpunkte: Wirtschaft | Verbraucherschutz | Internet