Scammers like to demand electronic forms of payment. Most common requests are for gift cards, money orders, E-Transfers and cryptocurrency. These forms of payment are usually used because they require no in person interaction, are difficult to trace back to the scammer, and can be accessed from around the world. These transfer methods make it difficult for police to trace the suspect.
Since cryptocurrency is a relatively new and complex asset, but its popularity is growing, we want to provide a brief explanation about its most common form, Bitcoin, to help citizens understand why they should be skeptical if someone, especially someone claiming to be from a government, authority, or financial institution is allegedly asking you to pay them with it.
It’s important for citizens to know that there are nearly 9000 virtual assets (cryptocurrencies) that exist. The most popular names used in the public and by fraudsters are Bitcoin, Ether, Tether, and Litecoin.
What is Bitcoin?
Bitcoin is one of many cryptocurrencies, but the name is fooling. It’s not an actual currency like the Canadian Dollar (it is not centrally controlled by any entity). Instead, Bitcoin is a commodity that can be purchased and sold using other currencies, similar to purchasing a bar of Silver.
Bitcoin’s worth constantly changes, like investing in a bar of Silver. At this point, one Bitcoin is worth tens of thousands of dollars, but it could plummet at any time.
Every single Bitcoin transaction is also publicly available, which is stored on a ledger called the blockchain. However, transactions are also designed to promote the anonymity of the Bitcoin user.
Why do people use it?
- Fees are usually upon deposit and withdrawal.
- There is no third-party (a bank) that you have to pay typical banking fees to store your funds.
- It is a simple person-to-person transaction; however, each person remains anonymous.
- Because its value fluctuates, people see Bitcoin as an investment. It’s risky but could pay out.
Why is it used in scams?
Although it is reported that most bitcoin transactions (98.9%) are not associated to criminal activity, the birth of cryptocurrency has provided individuals with new mediums to facilitate criminal activity. As a digital currency, there is no way to track or identify who is sending or receiving Bitcoin. This is a perfect way for a scammer to receive a lot of money with no way of tracing it back to them.
Bitcoin involves no face-to-face contact with a bank teller or cashier; instead, money is placed into a machine like an ATM. Scammers are constantly trying to limit a complainant’s interactions with others to avoid the chance of someone warning the person that they are falling victim to a scam.
Top scams with Bitcoin/cryptocurrency as the means of payment include:
• Government impersonation – most prominent of all related scams
• Employment
• Romance
• Fraudulent Sale or Purchase
• Business Impersonation
• Family Emergency
• Investment
• Rental Property
• Extortion/Ransomware
Can you catch the scammer and get my money back?
With cryptocurrency, we can track where the money goes, but we can’t stop or reverse the transaction of cryptocurrency (unlike some banking where the bank can put a hold on the transfer), so unfortunately it is quite rare for your funds to be returned.
The identity of the owner of the scammer’s cryptocurrency account is not easy to identify either, however, we have been successful in many cases. The difficult part is that these scammers are generally located outside of Canada and thus we must engage with external agencies to assist in an investigation.
Should you be suspicious if someone asks for payment in Bitcoin?
Bitcoin is not a commonly recognized currency, and most citizens don’t understand it, so why would someone ask for payment in it? No government, authority, financial institution, or reputable business will ask you to send Bitcoin. If you don’t understand it, you shouldn’t be paying with it!
We encourage citizens to learn more about cryptocurrency investment scams here.