[00:00:26] Lee Reiners: Cryptocurrency’s tailor-made to suit the needs and purposes of criminals.
[00:00:53] Bob: Welcome back to The Perfect Scam and our special two-episode series on cryptocurrency scams.
I’m your host, Bob Sullivan.
Last week we heard from Mei Mei Soe.
She lost her life savings and money she borrowed because of a crypto scam.
There are so many stories like Mei Mei’s that we’ve heard recently.
This is a new crime and things are moving fast.
Median losses are $11,000 for victims in their 70s.
That’s why we’re doing this special two-part episode.
[00:02:15] Bob: What kinds of calls are you getting to the helpline about crypto?
[00:02:18] Amy Nofziger: So, we’re getting calls in really two different ways.
They’ll just say, “Oh, this is an ATM machine.
Is that something you’re interested in?”
“Oh, you know I like to sew.
What are yours?”
“Oh, you know, I dabble in crypto.”
And that’s usually how the conversation starts.
[00:04:22] (commercial clip) Is the hype too much?
I cant tell you everything.
But if you want to make history, you gotta call your own shots.
We going to the league, we going to the league, we going to the league.
You know, we don’t want to miss out.
We, we call it FOMO, right, the fear of missing out.
[00:05:22] Bob: Oh my God.
She met a person through LinkedIn who offered to virtually hold her hand while she invested in crypto.
She spent all her life savings on it and borrowed $150,000 too.
But in the end, well this was all stolen by her friend.
The way her story ends, well, Amy has heard it many times before from helpline victims.
So once I saw my account hit 1 million dollars, I wanted to withdraw."
No, we can’t take it out of, you know, your principal in the account.
[00:06:42] Amy Nofziger: So this consumer was working on her computer when a pop-up came up.
And we’ve heard about these tech support scams, you get a pop-up, alarms go off.
They said that there was a virus, and to not shut it down.
Right, no story is exactly the same with these.
These often involve criminals impersonating famous personalities such as Selena Gomez.
[00:12:31] Bob: Of course all those crypto ads have ramped up another common phenomenon, FOMO.
Fear of missing out.
As I said it’s on commercials.
We’re not going to miss out on this.
They know our mindset.
Listen for the word bitcoin.
If you hear that, stop.
But the criminals aren’t even saying those words now.
They’re saying, um, QR code.
They’re saying ATM machine.
They’re saying, you know, go to the Coin Star machine.
Just take that QR code and scan it, right.
So they’re, they’re circumventing the red flags that we tell people.
So the employee was working at a convenience store.
And she received a phone call at the store on her duty, and they pretended to be FedEx.
When they said, you know, “Hey this is FedEx.
And they said, “Well, you should probably pay it or the shipment’s not coming.”
Or I’m going to get a Slurpee and some crypto today.
Why do we even have these machines there?
It doesn’t make sense to me.
[00:16:56] Amy Nofziger: Instant – gone.
[00:16:57] Bob: Yeah.
[00:16:49] Amy Nofziger: Yeah, not even a thought.
[00:17:05] Bob: Gone in an instant.
That’s what makes crypto scams so attractive to criminals.
To understand better where all this comes from, we enlisted the help of Lee Reiners.
You heard from him last week too.
Last week he told us crypto is the perfect payment mechanism for people who want to do bad things.
And that that’s not Monday morning quarterbacking.
So a bit of an uphill slog at first though.
[00:18:36] Bob: Getting to the question I should have asked Lee first, what is cryptocurrency?
And they remained at zero for, you know, the better part of a decade.
So things like, you know, cryptocurrency attracted a lot of speculators.
And so it wasn’t just crypto.
I mean these are risk averse people, there’s certainly self-selection going on here.
[00:22:42] Bob: But you know who has kept up, criminals.
You know, look at the pager, look at the, the cell phone.
So can you address both those things?
So they don’t care about, you know, the fundamentals or anything like that.
It’s not fully anonymous.
And I can, you know, I need that to send the bitcoin to you.
So it’s not fully anonymous in that sense.
Um, and that is true.
I mean you could see every single transaction that’s ever occurred.
[00:27:13] Bob: Perhaps the second question on your mind is: Is crypto a Ponzi scheme?
So I asked that too.
Is crypto a Ponzi scheme?
You know when you think of Bernie Madoff, he was obviously a real, a real person.
Right, the greater fool theory.
And so those economics are identical to, you know, traditional Ponzi schemes.
It can’t, you know, it can’t go on um, forever.
And again, I think that’s probably what you’re seeing right now.
And we do things like that with bonds too.
Uh, you know, you look at things of traditional currencies.
Well again, those are things that don’t apply in the cryptocurrency context.
So this is an asset that trades entirely on sentiment.
There’s no way to value it.
There’s no fundamentals.
By what basis would you say that it is oversold?
So there’s a fixed supply, just like there’s a fixed supply of gold.
So it’s obviously not digital gold.
[00:32:10] Bob: But what about El Salvador?
Isn’t the proof of crypto’s inherent value?
Um, the credit rating agencies has down, have downgraded El Salvador’s um, sovereign debt rating.
Even the experts don’t really understand it very well.
And certainly, can’t predict its future very well.
And he tries hard to stay neutral, but he does give them this piece of advice.
You know I, like I said, I don’t have a crystal ball.
[00:36:06] Bob: Kathy Stokes is Director of Fraud Prevention Programs for AARP.
And she’d like to see a lot more work done to protect consumers when it comes to cryptocurrencies.
[00:36:57] Bob: Hmm, but this machinery has now been put in place.
[00:37:10] Kathy Stokes: Yes.
[00:37:21] Kathy Stokes: Absolutely.
[00:37:23] Bob: Uh, so what do they need to hear about it?
[00:37:26] Kathy Stokes: Well, a few things.
What we’re seeing is it’s sort of two tracks.
The other thing we’re seeing is the uh use of cryptocurrency in online romance scams.
And they’ve lost everything they’ve put in.
[00:38:53] Bob: The criminals have made an entirely fake uh crypto exchange?
[00:38:58] Kathy Stokes: Yeah, and, and that’s nothing new.
So it’s, it’s nothing new, but they’re just getting so much better at it.
I, you know, crypto’s completely unregulated still.
Not enough people know enough about it.
[00:40:41] Bob: This sounds like it makes you a little bit mad.
[00:40:42] Kathy Stokes: It makes me angry.
That’s got to change.
This is a crime conducted by criminals, and not just like some guy in his mom’s basement.
It is time to change this.
It’s like, oh my gosh, I can’t believe that happened to you.
I am so sorry, you know, and bake them a lasagna or send them a pie.
And we really care, and we’re worried about them.
Financial crime, and by this I’m talking about scams, is a crime.
But we don’t look at it that way.
Or, I don’t know what they were thinking, but that would never work with me.
[00:43:50] Bob: Some of this change begins simply with the language we use around scams.
I can’t believe you fell for that!
How much money did you give them?”
They can’t believe this happened.
You gave them your money willingly."
Or they’ll say, “You know what, that’s not criminal, it’s civil.
We can’t help you.”
It’s not like she can go back into the workforce.
So there’s a societal impact too.
Maybe she has to start using federal or state programs to even exist.
[00:46:06] Bob: Hmm.
It’s also painful.
The victim is up against you know these huge, organized crime rings.
If we can look at it that way, and we can understand that Mom…
Mom didn’t do something wrong, she was the victim of a crime.
You know, say, “Mom, I’m so sorry, I’ve heard about this.
This is what’s happening.
I’m so sorry.
Have them make a run at take action.
Insist that they take a report even if they say it’s a civil matter.
Insist on that report.
[00:47:37] Bob: Want to make a difference?
You don’t have to wait until someone you love is a victim.
you’re able to help right now.
[00:47:44] Kathy Stokes: Well I think one of the things that we know is education works.
[00:48:33] Bob: Talking about it helps a lot.
Hey, did you hear about this latest scam?
You know be safe out there.
[00:48:53] Bob: Be safe out there.
Once in a while people do, but they aren’t smart, they’re just lucky.
As the FTC says, if someone is guaranteeing you big returns on crypto, they’re a scammer.
If someone demands payment in crypto or in gift cards, they’re surely committing a crime.
Be sure to find us on Apple Podcasts, Spotify, or wherever you listen to podcasts.
For AARP’s The Perfect Scam, I’m Bob Sullivan.
Cryptocurrency scholar Lee Reiners provides a big-picture view of why crypto enables scams.
