Cryptocurrencies - Risks associated with them and Cyber Investigations

Cryptocurrencies - Risks associated with them and Cyber Investigations

Investigating a crime scene is not an easy job. It requires years of study to learn how to deal with hard cases, and most importantly, get those cases resolved. This applies not only to real-world crime scenes but also to those in the digital world. An increasingly popular digital payment system that does not rely on banks to verify transactions - cryptocurrency, has enabled anyone and anywhere to send and receive payments. Instead of being physical money being transferred and exchanged in the real world, cryptocurrency payments exist solely as digital entries in an online database that describe specific transactions. When you transfer cryptocurrency funds, transactions are recorded in the public ledger. Cryptocurrency is stored in digital wallets.

Cryptocurrency got its name because it uses encryption to verify transactions. This means that advanced encryption is involved in storing and transferring cryptocurrency data between wallets and public books. The goal of encryption is to provide security and safety.

Unfortunately, crime with cryptocurrencies is on the rise. Cryptocurrency scams include:

  • Fake Websites: Fake websites that contain fake testimonials and crypto jargon that promise huge, guaranteed returns, provided you continue to invest.

  • Virtual Ponzi Schemes: Cryptocurrency criminals promote non-existent opportunities to invest in digital currencies and create the illusion of huge returns by repaying old investors with the money of new investors. One fraud operation, BitClub Network, raised more than $ 700 million before its perpetrators were indicted in December 2019.

  • Celebrity Recommendations: Online scammers present themselves as billionaires or celebrities who promise to multiply your investment in virtual currency, but instead steal what you send. They can also use messaging apps or chat rooms to spread rumors that a well-known businessman supports a particular cryptocurrency. Once they encourage investors to buy and raise the price, fraudsters sell their shares and the currency depreciates.

  • Romantic Scams: A trend of online dating scams, where scammers persuade people they meet in meeting apps or social media to invest or trade virtual currencies. Our center for Complaints on Internet Crime has published more than 1,800 reports of love scams aimed at cryptocurrencies in the first seven months of 2021, with losses reaching $ 133 million.

Otherwise, fraudsters can present themselves as legitimate traders in virtual currencies or set up fake stock exchanges to trick people into giving them money. Another crypto fraud involves fraudulent sales proposals for individual retirement accounts in cryptocurrencies. Then there is the simple hacking of cryptocurrencies, where criminals break into digital wallets where people keep their virtual currency to steal it.

Is cryptocurrency safe?

Cryptocurrencies are usually built using blockchain technology. Blockchain describes the way transactions are recorded into "blocks" and time stamped. It's a fairly complex, technical process, but the result is a digital ledger of cryptocurrency transactions that's hard for hackers to tamper with.

In addition, transactions require a two-factor authentication process. For instance, you might be asked to enter a username and password to start a transaction. Then, you might have to enter an authentication code sent via text to your personal cell phone.

While securities are in place, that does not mean cryptocurrencies are un-hackable. Several high-dollar hacks have cost cryptocurrency start-ups heavily. Hackers hit Coincheck to the tune of $534 million and BitGrail for $195 million, making them two of the biggest cryptocurrency hacks of 2018. Unlike government-backed money, the value of virtual currencies is driven entirely by supply and demand. This can create wild swings that produce significant gains for investors or big losses. And cryptocurrency investments are subject to far less regulatory protection than traditional financial products like stocks, bonds, and mutual funds.

What can you buy with cryptocurrency?

When it was first launched, Bitcoin was intended to be a medium for daily transactions, making it possible to buy everything from a cup of coffee to a computer or even big-ticket items like real estate. That hasn’t quite materialized and, while the number of institutions accepting cryptocurrencies is growing, large transactions involving them are rare. Even so, it is possible to buy a wide variety of products from e-commerce websites using crypto. Here are some examples:

  • Technology and e-commerce sites - Several companies that sell tech products accept crypto on their websites, such as, AT&T, and Microsoft. Overstock, an e-commerce platform, was among the first sites to accept Bitcoin. Shopify, Rakuten, and Home Depot also accept it.

  • Luxury goods - Some luxury retailers accept crypto as a form of payment. For example, online luxury retailer Bitdials offers Rolex, Patek Philippe, and other high-end watches in return for Bitcoin.

  • Cars - Some car dealers – from mass-market brands to high-end luxury dealers – already accept cryptocurrency as payment.