Thinking about investing in cryptocurrency? 11 Investigates how to avoid scams

PITTSBURGH — A woman from Clairton is like many people across the country getting swept up in the cryptocurrency craze, but learning quickly that it’s not easy to do.

“I just became really interested in it because I’ve been hearing people can make nice profits with it,” she said.

Bitcoin, ethereum and dogecoin are all digital global currencies that are not regulated by traditional banks.

It falls under a decentralized spreadsheet overseen by a consensus of miners, which are like accountants.

This type of record keeping is known as a blockchain.

“The idea basically was, the pro is that there’s not one institution that is controlling this right. So ... the government can’t seize your assets by subpoenaing Dollar Bank. The con is, of course, there’s not one institution that’s overseeing this,” said Bryan Rutledge, Carnegie Mellon University finance associate professor at the Tepper School of Business.

Rutledge said many people relate the digital coin world to a precious commodity with a limited quantity, like gold.

“Blockchain technology is new, will be revolutionary and investing it is a good thing in the sense of, ‘Oh, I wish I could go back and invest in Amazon in 1998,’” Rutledge said.

That’s what is attracting people like the Clairton woman to invest $2,000 in the crypto market.

She heard about a cryptocurrency investment group on a YouTube channel about finance.

“I contacted them through the WhatsApp app and then they got back to me, and I asked him to explain the program,” she said. “He explained the different packages that they have: $500, $1,000 and $5,000. You pick ... what package you wanted to go with.”

The woman said the investor sent over text messages that seemed legit: “I handle over $200,000 in trades and custodial money transfers,” the investor said.

He included screenshots showing his Bitcoin accounts that he’s managing for clients.

“They told me to go withdraw the money converted to Bitcoin, and from Bitcoin, transfer over to their online account,” the woman said.

She saw her account grow by a few hundred dollars over the next few weeks.

“if you take your money and put it in the U.S. stock market over the course of a year, it’s going up or down by, I don’t know, plus or minus 20%. Bitcoin can go up or down by 20% in a day,” Rutledge said.

“I don’t know, a weird feeling just came over me. It just didn’t seem right,” the woman said. “I went back to the trader and told him that I wanted to get my money back.”

After the investor asked for more money, the Clairton woman knew she was scammed, which is on the rise according to the Better Business Bureau.

More than $21 million was reported in losses across the country last year, and the BBB says the average loss in Pennsylvania was more than $6,000.

“Cryptocurrency payments are not reversible either, so once you pay with crypto, you can usually only get your money back if the person you paid sends it back,” said Caitlin Driscoll of the BBB Western Pennsylvania.

And there is no agency that can help you recover your money.

“I think any investment in Bitcoin or cryptocurrencies ... is a gamble,” Rutledge said.

It’s a dynamic world, filled with unknowns and risks, and it’s captivating a new generation of investors.

I didn’t want anybody else to have to go through what I went through. You try to be honest, and everybody’s not honest when it comes to getting your money,” the woman said. “There’s still a lot I’m learning about it, and so it was just my step in trying to learn more about it.”

Cryptocurrency: What you need to know (NCD)

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