Cryptocurrency prices are well known to be volatile and subject to fluctuations. Several factors such as regulatory changes, security concerns, and market sentiment can impact the value of cryptocurrencies dramatically, and in a short period of time. The cryptocurrency market is still relatively new and uncertain, so it’s advisable to thoroughly research and consult with a financial advisor before making any investment decisions about any cryptocurrency.

Recently a well-known cryptocurrency exchange, Coinbase, was found guilty of breaking anti-money laundering regulations because it did not carry out proper background checks. New York State regulators learned about Coinbase issues for the first time during a routine supervisory inspection in May 2020. Flaws in a number of compliance procedures were discovered by the Department of Financial Services, including failed initiatives with the Office of Foreign Assets Control, client due diligence guidelines, anti-money laundering risk assessments, and transaction monitoring systems. The inspectors also discovered problems with the company’s record-keeping practices and reporting to the state department.

Throughout its investigation, the Department of Financial Services discovered that the corporation had amassed a backlog of more than 100,000 unreviewed transaction monitoring warnings, and that increased due diligence procedures were on backorder for 14,000 users. As a result, the cryptocurrency company must reimburse the New York State Department of Financial Services $50 million in fines and invest $50 million more in enhancing its compliance procedures.

This case may be the first one uncovered, but it is most likely not the only crypto exchange company that fails to properly verify and report users. The consequence of this is that crypto is currently the preferred currency used for fraud and scams, which is why it is important to be aware of the risks and to learn to protect your investment from bitcoin and crypto scams.

Cryptocurrency can be used for fraud and scams in several ways, including:

• Ponzi Schemes: Scammers promise high returns for investment in a new cryptocurrency, but in reality, they are using the funds from new investors to pay returns to earlier investors, creating a Ponzi-like structure.
• Phishing Scams: Scammers send fake emails or messages posing as a reputable cryptocurrency exchange or wallet provider, asking for sensitive information such as login credentials.
• Ransomware Attacks: Attackers infect a computer with malware that encrypts the user’s files, demanding payment in cryptocurrency as a ransom.
• Fake ICOs: Scammers create fake Initial Coin Offerings (ICOs) to trick people into investing in a nonexistent cryptocurrency.
• Pump and Dump Schemes: Scammers artificially inflate the price of a cryptocurrency through coordinated buying, then sell off their holdings at a profit, causing the price to crash for other investors.
• Romance scams: A love or internet romance scam involving social media or online dating can take on endless forms, and often, there can be a payment in cryptocurrency.

It’s important to thoroughly research and verify the authenticity of any cryptocurrency investment opportunities and to keep your assets in secure wallets. A company background check investigation and international due diligence conducted by trained investigators in the country where you need them help any investor uncover the truth behind any crypto deal, and make safe decisions based on evidence. Contact us if you are planning a crypto investment!

C. Wright

© Copyright Wymoo International.  All Rights Reserved.  This content is the property of Wymoo International, LLC and is protected by the United States of America and international copyright laws.  Wymoo® is a registered trademark.