CBS 58 Investigation: Crypto Scams Rise
MILWAUKEE (CBS 58) – If you’ve seen Bitcoin’s value skyrocket to $ 50,000 recently, you might have wondered if you’ve invested in cryptocurrency. But a word of warning, federal authorities are reporting a tenfold increase in crypto scams, and someone is using a Wisconsin address to try to get into your wallet.
Nikolai Martin was considering investing in cryptocurrency when someone contacted him on Facebook.
“This woman contacted me and said ‘hey, I wasn’t sure if you wanted to get into crypto’,” he said. And as social media buzzed about the rising price of Bitcoin, Martin was interested.
The woman said she represents crypto-hub.net, which claims to mine Bitcoin, and promises profits of 10 to 15 percent per day for “an unlimited time.” Any investment that promises this kind of return should be treated with extreme skepticism, but Martin didn’t see it that way.
“It seemed legitimate, where everything was lined up,” he said.
Martin said he started by depositing $ 100 per week on the website, but was put in touch with a so-called affiliate who quickly prompted him to donate more.
“So the affiliate took it upon themselves to say, ‘Well you’re not ambitious enough and I’m going to put $ 1,500 for you so you can make more money,’” Martin said.
The website gave Martin an account page where he could log in and view his investments. With the rapid rise in the price of Bitcoin, so were its supposed profits.
“It was going up fast,” he said.
Thinking he was making real profit, Martin continued to add more money to the account. But when he thought it was time to take the money out, he said his affiliate still had fees, taxes, or fees that Martin had to pay to keep his account active.
“Every day was like a rush, I had to go out at the ATM that minute, like that second, otherwise the price would go up,” he said.
Martin admits he got caught in a rush and ended up borrowing from friends, relatives and even his home improvement company. In the end, he says he gave up a staggering amount of money.
“I mean $ 120,000 to $ 150,000,” he said.
When he realized he was being ripped off, Martin went to the Better Business Bureau. Director of Investigations Lisa Schiller said they were receiving a huge spike in crypto-related complaints.
“There’s a lot of information, a lot of research that needs to be done before you invest any money,” Schiller said.
The BBB referred Martin to the Wisconsin Department of Financial Institutions, which does not give details of ongoing investigations, but accepted an interview to warn investors that the crypto space is beware of buyers.
Leslie Van Buskirk, of the securities division of the DFI, says complaints to the DFI Enforcement Bureau have increased eight times over last year.
“When you have a lightly regulated space, there is a lot that can go wrong, and there is really little protection for investors if they invest in a cryptocurrency scam and lose money,” she declared.
Nikolai Martin lives in Massachusetts. The reason Wisconsin authorities might be interested is the address listed on the crypto-hub’s website, which is on Lake Geneva.
CBS 58 Investigates went to the address on the website, we spoke with the owner of the house, who says she is not affiliated with the website, her address has been used without permission and she is working with DFI to have the website removed.
Online records show that whoever registered crypto-hub.net did so from Reykjavik, Iceland. Van Buskirk says it’s common to use real addresses to fake people.
“If you lose your money there is a good chance that the person gave you a fake name, the address is not real,” she said.
How should someone interested in cryptocurrency invest? Shidan Gouran is one of the industry’s top investors, and he thinks the average person should stay away, at least for now.
“I certainly don’t think you should be putting a significant amount of money into cryptocurrency as a hedge against inflation or to replace gold,” he said.
Gouran believes the average person should view the money spent buying crypto as a game, rather than an investment.
“That same person might say I’m going to take my lottery money, the two thousand dollars I spend a year or so on the lottery and say, you know, I’m going to put it in crypto, that’s a great idea. It’s a lot less risky, it’s fun and there are more rewards, ”he said.
Martin admits he was drawn to the idea of getting rich quick.
“In my account today, they say I have $ 5 million.”
And while he says investigators are working to track down the crooks, he knows he’s unlikely to get even a cent of his money back.
“I feel like an idiot,” Martin said.
The Federal Trade Commission explains cryptocurrency and common scams here.
Here is the FTC data on the peak of crypto scams.
To report a BBB scam, click here.