Investment Scams

Losses from cryptocurrency scams are on track to hit record levels in 2024 after scammers have increasingly used generative AI to trick victims.

Cryptocurrency scams are likely to cause more than $12.42 billion in losses in 2024, up from more than $11.89 billion in 2023, according to research by Chainalysis.

There have been at least more than $9.9 billion in confirmed losses from cryptocurrency scams in 2024, but that number is expected to go up as more data is analyzed, Chainalysis said.

"Large-scale scam operations are buoyed by an entire ecosystem that has emerged to facilitate fraud operations," said Jacqueline Burns Koven, head of cyber threat intelligence at Chainalysis, an interview with ConsumerAffairs.

Chainalysis said the most common types of scams are high-yield investment scams and so-called pig-butchering scams, accounting for around 50% and 30% of losses in 2024, respectively.

In cryptocurrency, high-yield investment scams are essentially Ponzi schemes that often rely on investors recruiting more investors, according to the California Department of Financial Protection and Innovation.

Scammers promising returns may advertise the scams on YouTube or other social channels and then get people to invest on a website through a cryptocurrency wallet, but it only a matter of time until these scams collapse and leave victims in their wake, DPFI said.

Pig-butchering scams, named after fattening a pig before slaughter, lure victims into making increasingly large contributions of cryptocurrency before the scammer vanishes, according to the Federal Deposit Insurance Corporation.

There was a 39% increase in losses from pig-butchering cryptocurrency scams in 2024 from 2023, Chainalysis said.

"The professionalization of the fraud supply chain over the years has certainly fueled the revenue increase for pig-butchering scams in particular," Burns Koven said.

What is driving cryptocurrency scams?

AI and social media media management are cheap and easily available for cryptocurrency scammers to use, Burns Koven said.

"Technologies have made fraud cheaper, more convincing and easier to scale," she said.

In particular, Burns Koven said scammers are using generative AI to create fake identifies, bypass identify verifaction and build deceptive websites and content.

"With the help of generative AI, scams become more convincing and harder to detect," she said.

Email Dieter Holger at dholger@consumeraffairs.com.

In a con where life imitated art, Squid Game fans found out the hard way that a cryptocurrency based on the Netflix series was just as risky as the money contest the series is based on. 

After a team of cryptocurrency creators rolled out a digital currency called SQUID, investors rushed to buy assets worth more than $3 million. But those same investors woke up Monday to find that the creators had closed down their website and taken off with the cash.

For the un-Squided, the Squid Game project is a crypto play-to-earn platform inspired by the Korean hit series on Netflix about a deadly tournament of children's games, according to CoinMarketCap. “SQUID is the only token that can be used in Squid Game. You will need SQUID to participate in a game or get restart after you fail the game.”

Netflix was quick to say it had no part in this. The streaming service told CNN Business that it was not affiliated with the cryptocurrency and declined to comment any further.

A “rug pull”

Gizmodo reports that this type of scam is called a "rug pull." That means the cryptocurrency creators cashed out of their coins in exchange for real money, quickly devaluing the crypto's value.

Like many crypto darlings, SQUID took off quickly. The digital asset hit a high of $2,861 before falling to $0 as of Monday, as reported by CoinMarketCap. The scam could have actually netted more for the creators if they allowed it to gain more traction. CoinMarketCap data reviewed by ConsumerAffairs noted that SQUID was on 34,183 individual watchlists. 

It seems that this particular hustle was planned out in advance. Some SQUID owners told CoinMarketCap that because of an anti-dumping mechanism put in place by the developers, they were forced to the sidelines with little choice but to watch helplessly as the cryptocurrency’s value climbed. 

Despite the plunge in value, it appears that some investors are still trying to pump money into SQUID. As of 11 a.m on Tuesday, CoinMarketCap listed the live Squid Game price at $0.003467 USD, with a 24-hour trading volume of $14,445,122 USD. 

The Federal Trade Commission (FTC) reports that it has sent checks to more than 4,500 consumers who lost money to a company called Blue Hippo that sold high-priced computers on an installment plan.

The case stretches back to the early 2000s. At the time, the internet was becoming mainstream, but smartphones and tablets were only a glimmer in Steve Jobs’ eye. People who wanted to access the growing benefits of the internet needed a personal computer.

In 2008, the FTC charged BlueHippo Funding, LLC and affiliate BlueHippo Capital, LLC with promising to finance new computers that they sold at a very high price. The agency said the companies collected money from customers and then failed to provide them with computers. 

The FTC also claimed that the two companies failed to disclose key terms of BlueHippo’s refund policy to customers prior to receiving payments.

ConsumerAffairs reported extensively on the issue in 2007 and received many reports from consumers who said the devices they received were old and out of date. We found that Wal-Mart's laptop and printer combo could be purchased for $571 at the time. In contrast, BlueHippo's slower laptop package carried a price tag of up to $2,698 -- almost five times the cost of Wal-Mart's better offering.

Contempt charges

After agreeing to a settlement with the FTC, the agency charged that BlueHippo continued to engage in deceptive practices. In 2009, the FTC sued the companies again, as well as CEO and sole owner Joseph Rensin, charging them with contempt for violating the 2008 order. 

After a lengthy court battle, the FTC won. It is now using the money it recovered from Rensin to provide more than $103,000 in refunds to consumers.

The FTC has the names and addresses of consumers who are eligible for a refund. The agency said people who receive checks should deposit or cash them within 90 days. 

Consumers who have questions about their checks can call the refund administrator Analytics, Inc., at 1-855-558-1233. It’s also important to remember that the FTC never requires people to pay money or provide account information to cash a refund check.

The Federal Trade Commission and the Office of the Illinois Attorney General are sending $4 million in payments to more than 10,000 consumers who were duped into giving money to the operators of a fraudulent debt collection agency. 

Consumers who fell victim to the scheme were tricked into paying debts that they either didn’t owe or that the defendants weren’t authorized to collect. 

The defendants did business under a number of names, including Stark Law, Stark Recovery, and Capital Harris Miller & Associates. The people behind the scheme allegedly harassed consumers with phone calls and demanded immediate payment for supposedly delinquent loans. 

Victims would sometimes be threatened with lawsuits or arrests and were told they would be charged with “defrauding a financial institution” or “passing a bad check,” even though failing to pay a private debt is not a crime. 

‘Brazen’ scam 

The complaint noted that many consumers ended up paying the debts they supposedly owed (even if they didn’t actually owe them) simply because they wanted to put an end to the calls and alleged threats.

The case is part of the FTC’s “Operation Collection Protection,” which aims to crack down on parties subjecting consumers to illegal debt collection tactics. 

“It’s illegal to harass people to pay debts they clearly don’t owe, and to sell phony debts to other debt collectors,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “We’re proud to partner with the Illinois Attorney General to halt these egregious debt collection practices.”

“Phantom debt collection is one of the most brazen scams today,” said Illinois Attorney General Lisa Madigan. “With the FTC, we are working to protect consumers by shutting down these scam operations.”

Consumers affected by this scam are receiving full refunds -- an average of $375 each. The FTC says consumers who receive checks should deposit or cash them within 90 days. 

There aren’t too many people out there who have been happy to hear a debt collector on the other end of the phone, and one of the latest purported schemes by a debt collection operation certainly won’t help that image.

Earlier today, the Federal Trade Commission (FTC) charged defendants Hardco Holding Group LLC, S&H Financial Group Inc., Daryl M. Hall, and Dequan M. Sicard with collecting money on fake debts by posing as lawyers and threatening to sue consumers if they didn’t pay up.

The agency said that the defendants often called people without identifying themselves as debt collectors and provided phony case numbers and a phone number to call so that they could address a pending or imminent lawsuit or criminal action charge. To get some people to pay up on these “phantom debts,” the defendants also allegedly threatened them with jail time or told them that police would be arriving at their home to take them away.

Additionally, the FTC says that the defendants often posed as legitimate small businesses and disclosed information on supposed debts to third parties, failed to send consumers required written notices with the debt amount and creditor’s name, and failed to give consumers the opportunity to dispute their debts.

The agency charges the defendants with violating the FTC Act and the Fair Debt Collection Practices Act and has entered a temporary restraining order to freeze their assets and seek equitable relief. The case was filed in U.S. District Court for the Middle District of Florida, Orlando Division.

How to handle fake debt collectors

The FTC says that fake debt collectors will often go to great lengths to get you to buy into their scams. The agency offers the following advice:

• If a debt collector says you owe a debt, before you agree to pay anything ask for a validation notice that says how much money you owe. By law, they have to send you a validation notice in writing, within five days of contacting you. If they don’t, that’s a sign that you’re dealing with a fake debt collector.
• If a debt collector threatens you with jail time, hang up the phone. They’re violating the law and you should report them to the FTC.
• If you own a small business, it might be a good idea to research online occasionally to check if anyone else is using your business’ name. And if you start receiving complaints about practices that your business is not engaged in, report it to the FTC.