Scammers Love Bitcoin, Consumers Not So Much


With transactions that become irreversible almost instantaneously, bitcoin and other cryptocurrencies are winning new converts — among scammers eager to avoid credit card chargebacks that can eat into their ill-gotten gains.

MyChargeBack Vice President Michael Cohen told Cointelegraph that scammers are increasingly trying to dupe victims into paying with crypto instead of credit cards because it’s harder to undo a crypto transfer.

For instance, he said credit card companies allow some chargebacks up to 18 months after the fact in the case of unauthorized transactions, but not when someone willingly makes a charge they later regret.

Consumers can often reverse those charges for up to six months, but Cohen said credit companies like Mastercard and Visa exclude cryptocurrency and gambling from that proviso. So, use your credit card to buy cryptocurrency that you give a scammer and you might be stuck.

“When it comes to crypto, consumers may have a chance of recovering funds only in the case of unauthorized transactions,” Cohen said.

Jack Dorsey Likes Bitcoin, But So Do Crooks 

That’s bad news at a time when bitcoin supporters are trying to increase its use and acceptance among mainstream consumers who are making more online purchases than ever as a result of the pandemic.

Bitcoin won a high-profile endorsement last month from Twitter and Square CEO Jack Dorsey, who voiced his support for the cryptocurrency.

However, in the past month alone, PYMNTS Bitcoin Daily has reported on nearly a dozen different scams and schemes involving bitcoin or other cybercurrencies.

For example, the U.S. Commodity Futures Trading Commission recently filed a complaint in a Texas U.S. district court against four people for allegedly fraudulently soliciting funds from individuals to attempt to wager on changes in the price of bitcoin.

A month earlier, the U.S. Attorney’s Office for the Southern District of New York charged four operators of a purported international digital-currency “Ponzi scheme” with money laundering and fraud.

And in India, several wealthy business owners allegedly fell victim to scammers who robbed them of their cryptocurrency by using fake bitcoin wallets, tricking victims into fraudulent trade agreements and then disappearing.

The Pandemic Is Making Scams Worse 

Such schemes are proliferating as the pandemic and economic hard times make consumers more vulnerable than ever to crooks.

As PYMNTS’ Preventing Financial Crimes Playbook recently noted, the U.S. Federal Trade Commission found at least 184,000 instances of pandemic-related fraud as of Aug. 31, costing victims more than $124 million.

Fraudsters perpetrating such schemes often target individuals by phone, posing as bank officials, IRS agents or public health administrators and asking for personal information or money in exchange for COVID-19 test kits, stimulus checks or work-from-home jobs.

The Financial Crimes Enforcement Network recently issued a warning that fraudsters are leveraging various illicit methods, including malware, phishing schemes, extortion and business email compromise (BEC) scams — all with a COVID-19 twist. Some are posing as government officials and asking for personal information for stimulus checks, for example, while others are targeting cryptocurrencies. If a scammer convinces someone to hand over money in the form of bitcoin or another cryptocurrency, odds are the victim will never get the money back.

The Dark Web Likes Bitcoin, Too 

According to a 2019 International Monetary Fund study, bitcoin has morphed since 2011 from being a “niche medium of exchange for the tech community” into “the currency of choice for drug dealers conducting transactions on a Dark Web” via platforms like Silk Road.

“Over the past five years, the combination of an encrypted network hidden from most of the world and a transactional currency that is nearly untrackable by law enforcement officials resulted in a small but significant marketplace of illicit vendors selling illegal wares,” the IMF found.

Additionally, the report said that more than 75 percent of Web domains cataloged as illegal by Terbium Labs were marketplaces fueled by bitcoin and other cryptocurrencies.

Good Luck Using Bitcoin At Your Local 7-Eleven 

There’s also the problem that bitcoin still isn’t widely accepted as a means of consumer payment, meaning its usage as a regular currency pales in comparison to its use as a speculative investment or tool for criminals.

Overstock CEO Jonathan Johnson told Karen Webster earlier this year that bitcoin as a consumer currency still has speed issues in terms of timing transactions properly.

“I don’t think it is quite immediate enough for payments in some cases,” Johnson said. “It’s tough when I’m in a 7-Eleven and I have to wait for the bitcoin blockchain to confirm the sale. That is not going to work for most people.”

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