The House Committee on Oversight and Reform of the United States Congress has recently asked a handful of the country’s regulatory agencies and crypto exchanges who have operations in the nation to hand over letters explaining their efforts to combat scams in the crypto space.
According to a press release published yesterday, Rep. Raja Krishnamoorthi (pictured), the Chair of the Subcommittee on Economic and Consumer Policy, addressed four agencies including the US Department of Treasury and the Securities and Exchanges Commission (SEC) and five cryptocurrency exchanges including Binance.US and Coinbase.
“As stories of skyrocketing prices and overnight riches have attracted both professional and amateur investors to cryptocurrencies, scammers have cashed in”, Krishnamoorthi stated in the letters.
He added: “The lack of a central authority to flag suspicious transactions in many situations, the irreversibility of transactions, and the limited understanding many consumers and investors have of the underlying technology make cryptocurrency a preferred transaction method for scammers”.
FTC Report Points to $1 Billion in Crypto Stolen in 15 Months
The 49-year-old Democrat who represents the 8th District of the state of Illinois cited a report from the US Federal Trade Commission (FTC) that pointed to over $1 billion in assets being stolen from investors from January 2021 to March 2022.
According to the FTC’s estimates, more than 46,000 people have been affected by these incidents with the majority of the assets being siphoned from the public being Bitcoin (BTC) tokens.
Compared to previous years, the amount lost by investors grew five-fold from $130 million in 2020 to $680 million last year. Most of these losses are considered investment-related frauds such as rug pulls, exit scams, and wallet hacks.
The Congressman acknowledged in the letters sent to exchanges that some of them have taken steps to protect their users such as code audits and insurance policies. However, the letters also emphasized that other brokers have failed to implement appropriate monitoring of their accounts to flag potentially fraudulent activities so investors can be notified accordingly.
“I am concerned about the growth of fraud and consumer abuse linked to cryptocurrencies. Notwithstanding federal regulations, cryptocurrency exchanges must themselves act to protect consumers conducting transactions through their platforms”, Krishnamoorthi commented.
Exchanges have until 12 September this year to submit documents describing their efforts to “combat crypto-related scams”, processes followed to “identify and investigate, and remove or flag potentially fraudulent digital assets”, and other relevant discussions about this topic.
In addition, the committee is also requesting more information on the tools used by exchanges to audit codes and other security protocols of the blockchains used by the tokens they list, mechanisms that are in place so individuals are aware of the risks involved in making crypto trades, and if users’ funds are insured in some way.
How to Identify Potentially Fraudulent Projects in the Crypto Space?
According to the FTC’s recommendations, there are a few ways to steer clear of fraudulent projects in the crypto industry.
The first and perhaps most usually cited rule is that if it sounds too good to be true it is probably a scam. In this regard, the FTC states that scammers are interested in offering attractive profits or guaranteed returns as a way to entice unwary investors to hand over their money.
In addition, the agency also said that investors should be aware of online dating as one of scammers’ preferred ‘modus operandi’ for attracting preys. Fraudsters use fake accounts on social media depicting pictures of handsome male or female individuals taken from the internet and use these fake identities to engage in virtual relationships with the victims.
If an online date suddenly starts asking for cryptos or any other kind of asset, that should be taken as a warning sign that the relationship is just being used as a mean to steal money.
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