Steve Weisman is a lawyer, college professor, author, and one of the country’s leading experts in cybersecurity, identity theft, and scams. See Steve’s other Con Watch articles.
The values of cryptocurrencies have recently increased dramatically. The price of Bitcoin, for example, reached $106,000 in mid-December. There are many factors that contribute to the rise in the value of cryptocurrencies, but primary among those is the upcoming presidency of Donald Trump, who is strongly in favor of cryptocurrencies. These developments are causing many people to rush into purchasing crypto, and scammers are ready to meet this new demand.
One popular scam is exemplified by Venotux.com, which is a fraudulent cryptocurrency trading platform promoted using deepfake videos of celebrities such as Ronaldo, Elon Musk, Bill Gates, Mark Zuckerberg, and Drake, who appear to endorse Venotux on YouTube, TikTok, Instagram, and Facebook. The ads containing the fake endorsements promise that investors will receive 0.31 free Bitcoin ($30,000) merely for setting up an account on Venotux. Victims can see the free Bitcoin added to their account; however, if they attempt to withdraw funds, they are informed that they must make a minimum deposit of 0.005 Bitcoin ($485) to activate the account’s withdrawal capabilities.
The truth is no free Bitcoin was ever deposited into their account by Venotux. Once enough people had made deposits of Bitcoin to be able to withdraw funds, the scammers closed down the site, and all of the Bitcoin deposited by the victims was stolen. This scam has been repeated using a number of different phony trading sites such as Bitsowex.com, Bitxspark.com, Nevofex.com, Tokenely.com, and Xbirex.com.
Some particular red flags for trading platform scams are that legitimate trading platforms do not give away Bitcoin for setting up an account with them, and no legitimate site requires users to deposit funds before withdrawing funds from their accounts.
You should always investigate any trading platform you are considering before investing. See if the platform is registered with the SEC and licensed. You can also look for reviews of the site on cryptocurrency watchdog sites such as CoinMarketCap or CoinGecko. And check with the domain registry site whois.com to see who set up the particular site and how long it has been in existence.
Venotux is just the latest of many scams that use cryptocurrencies as a hook. Early last year, fraud charges were brought by the Colorado Division of Securities against Pastor Eli Regalado and his wife, who created a cryptocurrency called INDXcoin and sold it to members of his church and other churchgoers in the Denver area through a cryptocurrency marketplace that he created and controlled. He announced he was selling the cryptocurrency on YouTube, telling people that God told him to do this, and that God said it was a safe and profitable investment. It wasn’t. More than a million dollars of investors’ money went to fund the pastor’s and his wife’s extravagant lifestyle and, according to the Colorado Division of Securities, INDXcoin is worthless.
Pump and dump scams have also been proliferating. This scam has been with us for hundreds of years, but recently it has evolved to keep pace with today’s world of finance. A traditional pump and dump scheme is when scammers buy low priced-stocks and then artificially inflate the price by posing as people with inside information that indicates that the price of a stock is about to rise. This prompts victims of the scam to buy the stock, which temporarily inflates its value. Meanwhile, the scammers sell their stock when the stock price gets bumped up and are long gone when the stock deflates and reverts to its true value. Pump and dump scams are illegal.
Now we are seeing this scam updated to using cryptocurrencies as the basis of the pump and dump. Crooks have actually set up chat groups dedicated to spreading false or misleading information about the value of particular cryptocurrencies in order to profit from the pump and dump scam. You would think that such brazen flaunting of the law would be punished by law enforcement around the world, but, in fact, there are some people that believe that because cryptocurrencies are highly unregulated, the pump and dump securities laws do not apply. However, this is not the position of the Commodity Futures Trading Commission (CFTC), which has gone on record as saying that it considers such activities as being in violation of fraud laws.
Ultimately when it comes to protecting yourself from investment scams, the place to find that helping hand is at the end of your own arm. Never invest in anything you do not fully understand, and never invest with anyone you have not carefully vetted. Stock or cryptocurrency trading based on unverified information you receive via social media, text message, or chat room is extremely risky and unreliable. Many people fail to follow these principles out of fear of missing out (FOMO), but no one should invest in cryptocurrencies unless they are knowledgeable about the investment.
Read the SEC’s Investor Alert about possible problems you can encounter when investing in Bitcoins or other cryptocurrencies.
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