Article by John Joy, Managing Attorney, FTI Law.
Crypto scams are becoming increasingly hard to spot. With scammers using glossy websites and spoofed endorsements, even sharp investors can get caught out when trying to invest. Even if you haven’t been a victim, but you know about crime or fraud involving crypto, you should still report it as you could earn you a whistleblower award for doing so. Here are the six things to do if you think you’ve witnessed crypto crime. (If it’s a major fraud, skip straight to number 6).
1. Preserve Your Records
When reporting fraud, you may need to provide records of your transactions and communications. If you don’t preserve your records, it could mean that the authorities will not take you seriously, and you may miss out on having funds returned to you if you were a victim of the fraud. Preserving records means more than simply not deleting your emails and text messages. In addition to having these on your mobile device, you should also make copies and have them stored in the cloud in case anything happens to your device. The same goes for transaction records. These might be visible in an online account, but you can never be sure when the company will remove them. Fraud investigations can take a long time, so it’s important you have a long-term plan for keeping these records safe.
2. Contact the Company
But Never “Pay To Withdraw” If you get the feeling that something isn’t right with a crypto investment, you should immediately contact the company to ensure it’s not a misunderstanding. Not only should you contact them via email and phone, but also use social media platforms as these can let others know that you are having problems. In the event that the company responds and asks you to make a payment to withdraw your funds, under no circumstances should you pay them. If a fraud or scam is being deployed, you are certain to lose more money. If the company is legitimate, you should be able to negotiate the release of your funds without further payments.
3. Seek Out Allies
A lot of cryptocurrencies have active online communities that share news via Reddit, Discord, Telegram and other platforms. If you are having problems with a crypto investment, but aren’t sure if it’s a scam, you should reach out to others in the community to see if they’ve encountered similar issues. While communities can be a useful way to get information, beware of any advice you get that encourages you to pay more to withdraw your funds. As we mentioned above, this advice should be ignored. The best way to use online communities is to share your concerns so that others are aware of potential issues, and build a network of people in similar circumstances so that you can collectively work to resolve or report the issues. If you are sure that something is a scam or fraud, you can also alert others using online review platforms such as Trustpilot.
4. Report to Local Authorities
As soon as you have determined that you have been the victim of a fraud or scam, you should contact your local authorities immediately. While your local authorities may not open an investigation on the spot, they will have the best information on what resources are available to you and can tell you about other agencies you should report to. Often, cybercrime agencies wait until they have received a number of reports about a scam or fraud before they open an investigation, so even if the amount you lost was relatively small, it is important to report it to these agencies as it can help build momentum for an investigation.
5. Consider Reporting to U.S. Authorities
Depending on how big the fraud is, it could be useful to report the fraud to authorities in other countries as this can improve your chances of catching the perpetrators. When it comes to prosecuting crypto crime, the U.S. is the leader in the space. Not only does the U.S. have an internet crime complaint center that you can make a complaint to, but it also has two other regulatory agencies (the SEC and the CFTC) that prosecute fraud and crime in the crypto space. If you are a U.S. resident, there is a greater chance that U.S. authorities will act on your information, but even if you are not, there are no restrictions on non-U.S. individuals reporting to these agencies.
6. Speak to an Attorney
If know of a major fraud or crime involving cryptocurrency, you should definitely speak with an attorney who specializes in reporting crypto fraud. Attorneys can advise you on the best place to report, and can also report information on your behalf. Importantly, an attorney can advise you on whether you could be eligible for a whistleblower award. A whistleblower award is a payment you can get if you report fraud to certain U.S. regulators. This includes non-internet crime where cryptocurrency was involved, such as paying bribes or money laundering. The average SEC whistleblower award is over $4 million, so it is definitely worth your while speaking to an attorney. Most attorneys who report fraud work on a contingency fee basis, meaning that you don’t pay anything unless you receive a whistleblower award.