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Surprising No One, Cryptocurrency Scams Are On The Rise


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Bitcoin is back in the news as the cryptocurrency surpassed the $10,000 level for the first time since October this past weekend. Bitcoin is now up about 40% so far this year, but still remains down about 50% from its all-time high in December 2017.


Despite the poor returns of bitcoin—and basically every other cryptocurrency, since late 2017, cryptocurrencies haven't died. In fact, it's quite the opposite. A staggering 81% of Americans are familiar with at least one type of cryptocurrency, according to a YouGov survey. Furthermore, nearly one in five Americans have purchased cryptocurrency in the last year. 


Given how many people are now familiar with cryptocurrencies, this next piece of news may not be entirely surprising.


In 2019, scams involving bitcoin and other cryptocurrencies totaled $4.3 billion, according to cryptocurrency analysis firm Chainalysis' 2020 Crypto Crime Report. The 2019 total is significantly higher than the $3 billion combined total from 2017 and 2018. Ponzi schemes involving cryptocurrencies accounted for 92% of the total. Blackmail scams, while totaling only $22.5 million for the year, spiked for the second-consecutive year as they nearly quadrupled from the total in 2018.


The report details how cryptocurrency scams are the largest segment of cryptocurrency crime because of the "unique position cryptocurrency currently occupies in the public eye." Most people have heard of cryptocurrencies and believe they offer the ability to get rich quick. However, those falling for these scams typically don't know enough about them to know whether or not they're being scammed.


Once the scam takes place, the scammer needs to move the money, or launder it. The report found that two exchanges, Binance and Huobi, accounted for more than 50% of the total $2.8 billion in illicit bitcoin transactions that moved from criminal enterprises to exchanges in 2019.


The report notes that since nearly 60% of the funds were transferred to exchanges that collect Know Your Customer (KYC) information, there may be a possibility these funds could be recouped using blockchain analysis and subpoenas.


Cryptocurrencies have been associated with illicit activity for years, however it may not be as prevalent as it’s made out to be. Despite last year seeing $11.5 billion worth of cryptocurrency transactions associated with criminal activity, the total represents just 1.1% of total activity.


The number of scams involving cryptocurrencies is likely to only increase as time goes on. Even Tesla co-founder and CEO Elon Musk warned of cryptocurrency scams last week, tweeting "The crypto scam level on Twitter is reaching new levels. This is not cool." If the United States Federal Reserve gets its way, the best solution to these scams may be to ban all cryptocurrencies as they look to introduce their own cryptocurrency.


Leftover Crumbs

  • A first for Softbank. SoftBank Group continues to see its startup investments struggle as direct-to-consumer retailer Brandless is laying off nearly 90% of its employees as it prepares to cease operations. Brandless, which sells beauty products, organic snacks and everyday essentials for $3, will become the first startup backed by the SoftBank Vision Fund to fail. The company's board said its business model was "unsustainable" in the "fiercely competitive" direct-to-consumer industry.

  • Things are getting testy between Amazon and the Pentagon. Amazon is seeking to depose United States President Donald Trump and Defense Secretary Mark Esper in regards to the Department of Defense's decision to not award the company the $10 billion Joint Enterprise Defense Infrastructure Cloud (JEDI) contract. Amazon is seeking to determine if Trump was trying "to screw Amazon" by awarding the contract to Microsoft. "President Trump has repeatedly demonstrated his willingness to use his position as President and Commander in Chief to interfere with government functions – including federal procurements – to advance his personal agenda," said an Amazon spokesperson.

  • So he can still walk away with more than $1 billion then? WeWork Executive Chairman Marcelo Claure said it is "totally false" that WeWork co-founder and former CEO Adam Neumann walked away with more than $1 billion. "There’s a tender going on right now in which Adam will have the right to participate with shareholders," said Claure. "He’s a large shareholder of the company, he was a founder, and as we do a tender to buys shares from other shareholders, he’s going to have the same opportunity as any other shareholder." It has been previously reported that Neumann walked away with about $1.7 billion when WeWork took over the struggling startup.

  • They don't want to fight for it. Edgewell Personal Care has walked away from its deal to acquire shaving startup Harry's for $1.37 billion after the United States Federal Trade Commission filed a lawsuit last week to block the deal. "We are disappointed by the FTC's decision and continue to disagree with its position," Edgewell CEO Rod Little said in a statement. "Given the inherent uncertainty of a potential trial, the required investment of resources and time ..., we determined that proceeding with our standalone strategy is the best course of action for Edgewell."

  • They're willing to pay more. Xerox has raised its offer to acquire HP, which is nearly four times as large as Xerox, to $24 per share, valuing the company at about $34 billion. "Xerox’s offer provides HP stockholders with both significant, immediate cash value, and meaningful upside via equity ownership in the combined company," Xerox said in a statement. In November, Xerox offered $22 per share to acquire HP, which was unanimously rejected by HP's board. HP said at the time that the deal undervalued the company, and was not in the best interest of HP shareholders.