Here's how cybercriminals are exploiting digital currency investors


As more investors warm up to the idea of cryptocurrencies, cybercriminals are adapting age-old fraud schemes to exploit them.

The Commodity Futures Trading Commission (CFTC) warned investors this week to avoid “pump-and-dump” schemes, which can be particularly effective in the thinly traded digital currency world.

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"Pump-and-dump schemes long pre-date the invention of virtual currencies, and typically conjure the image of penny stock boiler rooms, but customers should know that these frauds have evolved and are prevalent online,” the CFTC said. “Even experienced investors can become targets of professional fraudsters who are experts at deploying seemingly credible information in an attempt to deceive.”

Pump-and-dump schemes involve coordinated efforts among a group to “pump” up fake demand by buying shares and then sell them quickly for a profit, leaving traders unaware of the plan left with currency valued at a much lesser price than expected.

According to the CFTC, this type of market manipulation occurs in the “largely unregulated cash market for virtual currencies and digital tokens, and typically on platforms that offer a wide array of coin pairings for traders to buy and sell.”

How to avoid being victimized

Investors should not act on tips shared on social media platforms, the CFTC advises, adding that pump-and-dump schemes are characterized by messages urging the need to immediately purchase currency or tokens. They should also be wary of responding to sudden spikes in activity.

Investors can also protect themselves by only purchasing digital currencies that have been “thoroughly researched.”

The CFTC said it has received complaints from customers that have lost money to pump-and-dump schemes.