MILWAUKEE (CBS 58) — If you saw the value of Bitcoin skyrocket to $50-thousand recently, you might have wondered about investing in cryptocurrency. But a word of caution, the feds are reporting a ten-fold increase in crypto scams, and somebody is using a Wisconsin address to try to get into your wallet.
Nikolai Martin thought about investing in cryptocurrency when someone contacted him on Facebook.
“This woman reached out to me and said ‘hey I didn’t know if you were interested in getting into crypto,’” he said. And since social media was buzzing about the price of Bitcoin going up, Martin was interested.
The woman said she represented crypto-hub.net, which claims to mine Bitcoin, and promises profits of 10 to 15-percent daily for “an unlimited amount of time.” Any investment that promises that kind of return should be treated with extreme skepticism, but Martin didn’t see it that way.
“It seemed legit, where everything lined up,” he said.
Martin said he started off depositing $100/week with the website, but he was put in touch with a so-called affiliate who soon pressured him to give more.
“So the affiliate took it upon herself to say ‘well, you’re not being ambitious enough and I’m going to put in $1,500 for you so that you can make more money,’” Martin said.
The website gave Martin an account page where he could log in and see his investments. With the price of Bitcoin going up fast, so were his supposed profits.
“It was shooting up quick,” he said.
Thinking he was making real profit, Martin kept adding money to the account. But when he thought it was time to take money out, he says his affiliate would always come up with a fee, or tax, or charge that Martin had to pay to keep his account active.
“Every day was like a rush, I had to go out to the ATM that minute, like that second, otherwise the price was going to go up,” he said.
Martin admits he got caught up in the rush, and ended up borrowing from friends, relatives and even his home improvement business. In the end, he says he gave up a staggering amount of money.
“I want to say $120,000 to $150,000,” he said.
When he figured out he was getting scammed, Martin went to the Better Business Bureau. Director of Investigations Lisa Schiller says they are getting a huge spike in crypto-related complaints.
“There’s a lot of information, a lot of research that needs to go into something before investing any amount of money,” Schiller said.
The BBB referred Martin to the Wisconsin Department of Financial Institutions, who do not give out specifics about ongoing investigations, but agreed to an interview to warn investors that the crypto space is buyer beware.
Leslie Van Buskirk, DFI Division of Securities, says complaints to the DFI Enforcement Bureau are up eight times compared with last year.
“When you have a minimally regulated space, there’s a lot that can go wrong, and there’s really little protection for investors if they do invest in a cryptocurrency scam and lose money,” she said.
Nikolai Martin lives in Massachusetts. The reason Wisconsin authorities might be interested is the address listed on the crypto-hub website, which is in Lake Geneva.
CBS 58 Investigates went to the address listed on the website, we spoke with the owner of the home, who says she is not affiliated with the website, her address was used without permission and she is working with DFI to get the website taken down.
Online records show that whoever registered crypto-hub.net, did it from Reykjavik, Iceland. Van Buskirk says using real addresses to fake people out is common.
“If you lose your money, chances are the person gave you a fake name, the address isn’t real,” she said.
How should someone interested in cryptocurrency go about investing? Shidan Gouran is one of the earliest investors in the sector, and he thinks the average person should stay away, at least for now.
“I certainly don’t think you should put a significant amount of money in cryptocurrency as a hedge against inflation or as a replacement for gold,” he said.
Gouran thinks the average person should treat money spent buying crypto as gambling, rather than an investment.
“That same person could say I’m going to take my lottery money, the two-thousand dollars I spend a year or whatever on the lottery and say you know, I’m going to put that in crypto, that’s a great idea. It’s much less risky, it’s fun and there’s more rewards to it,” he said.
Martin admits he was lured in by the idea of getting rich quick.
“In my account today they say I have $5M.”
And while he says investigators are working to track the scammers down, he knows that it is unlikely he’ll get even one cent of his money back.
“I feel like an idiot,” Martin said.
The Federal Trade Commission explains cryptocurrency and common scams here.
Here’s the data from the FTC on the spike in crypto scams.
To report a scam to the BBB, click here.