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News/The Dark Side of Cryptocurrency: Tom Brady's FTX Loss and the Devastating Impact of Crypto Fraud on Families

The Dark Side of Cryptocurrency: Tom Brady's FTX Loss and the Devastating Impact of Crypto Fraud on Families

Apr 6 2023

last year4 minutes read
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Protect Yourself from Fraud and Learn from Tom Brady’s Loss

Written by Van - Perfected by ChatGPT

Cryptocurrencies bring the potential for financial freedom and a new way to invest. But with great opportunity comes significant risk, as crypto scams have left many people devastated. From Tom Brady’s shocking crypto loss to families losing their entire life savings, it’s crucial to be aware of the dangers and learn how to protect yourself.

Tom Brady’s Crypto Loss

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Tom Brady, the famous NFL quarterback, made headlines when he lost a considerable sum due to his connection to FTX. As a brand ambassador and one of the largest individual equity holders, Brady found himself at the center of a financial storm when FTX collapsed in November 2022.

The fallout left Brady and other high-profile investors like Robert Kraft with significant losses. This example highlights the impact celebrity involvement can have on crypto scams and why it’s essential to be cautious when investing. Despite the significant financial losses incurred due to one of the largest cryptocurrency scams in history, FTX, the unfortunate reality is that numerous other fraudulent schemes continue to emerge and operate within the world of digital currencies.

Read this article and guide to stay informed about the most prevalent and emerging scams in the cryptocurrency landscape.


Common Types of Crypto Scams

Phishing attacks

Phishing attacks are a form of online scam where cybercriminals attempt to trick users into revealing sensitive information such as login credentials, wallet addresses, and private keys. These attacks often involve the use of fraudulent emails or websites that mimic legitimate organizations or platforms. Cybercriminals may create fake exchange sites, wallet services or even impersonate support staff to deceive unsuspecting victims. To avoid falling for phishing attacks, it’s crucial to double-check the authenticity of any communication received, especially those containing links, and never disclose private keys or other sensitive information.

Fake ICOs and token sales

With Initial Coin Offerings (ICOs) and token sales being popular means of investing, scammers have found an opportunity to defraud investors by launching fake projects. These scams involve the creation of a false project, complete with a convincing whitepaper, website, and marketing materials, to lure investors into purchasing non-existent tokens. Once the scammers have collected funds from their victims, they often disappear without a trace.

To avoid fake ICOs and token sales, it’s essential to conduct thorough research on the project, its team members, and any associated partners. Additionally, be wary of projects with unrealistic promises or those that pressure you to invest quickly.

Ponzi schemes and investment scams

Ponzi schemes are fraudulent investment operations where returns are paid to existing investors from the funds contributed by new investors, rather than from profit earned by the operation itself. In the crypto world, Ponzi schemes often manifest as investment platforms that promise high returns with little to no risk. Scammers may also create complex, multi-level referral systems to incentivize victims to recruit new investors.

One example of a cryptocurrency scam involving a Ponzi scheme is Logan Paul’s CryptoZoo. Logan Paul, a well-known internet personality, and his NFT project, CryptoZoo, faced a class-action lawsuit for allegedly promising “a really fun game that makes you money.” These words backfired on the YouTube star as CoffeeZilla exposed everything Logan Paul had said, and not completed, in his investigative YouTube series. You can explore the alleged CryptoZoo Logan Paul game, the CryptoZoo art, and CoffeeZilla Logan Paul video by clicking on each respective keyword.

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Social media and celebrity impersonation scams

Scammers often use social media platforms to impersonate celebrities, influencers, or well-known figures in the crypto industry in an attempt to gain trust and credibility. They may create fake profiles, utilize similar usernames or profile pictures, and even hijack verified accounts to deceive their victims. These impersonators often promote fraudulent giveaways, investment opportunities, or ask for crypto donations under the guise of a well-known individual.

To protect yourself from social media and celebrity impersonation scams, always verify the authenticity of the account before engaging with any content, and exercise caution when approached by unfamiliar profiles, even if they appear to be from a known figure.


How to Get Help

Using blockchain explorers to track transactions and find associated wallets

Blockchain explorers are search engines that allow users to explore the blockchain, view transactions, and obtain information on specific addresses or tokens. Etherscan and BSCscan are two popular explorers for the Ethereum and BNB Smart Chain networks, respectively.

Step-by-step guide on how to use Etherscan:

  1. Visit the Etherscan website
  2. Enter the wallet address or transaction hash you want to investigate in the search bar and press “Enter”
  3. The explorer will display relevant information, such as transaction history, token balances and associated smart contracts
  4. Analyze the data to identify any suspicious activity, such as unexpected transfers or token approvals

Identifying red flags and suspicious activity

Some common indicators of suspicious activity may include:

  • Transactions to unknown addresses
  • High volume or frequency of transactions within a short period
  • Transfers to known scam addresses or blacklisted wallets

Reporting scams to the appropriate authorities and organizations

Law enforcement agencies - In the event of a scam, it’s crucial to report the incident to your local law enforcement agency. They can guide you through the process of filing a report and may collaborate with other agencies to investigate the case.

Online resources for scam reporting and support - There are several online platforms where you can report scams and seek support from the crypto community. 

These include:


How to Track Down Someone Who Scammed You in Crypto

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Analyzing transaction data and addresses

By using tools like DeBank, you can explore transaction data, trace funds, and gather valuable insights into the scammer’s activities. DeBank allows users to track DeFi activities, lending and borrowing positions and token holdings across multiple chains.

Also use blockchain explorers to figure out where funds were sent and see if they reached a centralized exchange.

Identifying patterns and connections between wallets

Tools like BubbleMaps can help visualize the relationships between different wallet addresses, making it easier to identify patterns and track the flow of funds. BubbleMaps displays transaction data in a user-friendly graphical format, enabling users to see connections between addresses and follow the movement of crypto assets.

Collaborating with law enforcement and cybersecurity experts

When tracking down a scammer, it’s essential to involve law enforcement agencies and cybersecurity experts. These professionals have access to specialized tools and resources, as well as the legal authority to pursue and prosecute criminals. By working together, you increase the chances of recovering your lost funds and bringing the scammer to justice.


Protecting Yourself from Crypto Fraud

Tips for ensuring your crypto assets are secure

  • Use a hardware wallet: Store your crypto assets in a hardware wallet, which offers offline storage and enhanced security against hacks and theft.
  • Enable two-factor authentication (2FA): Implement 2FA on all accounts, including email and exchange accounts, to add an extra layer of security.
  • Create strong, unique passwords: Use complex, unique passwords for each account and avoid reusing passwords across different platforms.
  • Keep your private keys safe: Never share your private keys with anyone, and securely store them offline or in an encrypted format.
  • Be cautious with public Wi-Fi: Avoid accessing sensitive crypto accounts on public Wi-Fi networks, as they can be insecure and vulnerable to attacks.

Researching investments and verifying legitimacy

  • Conduct thorough research: Investigate the project’s team members, whitepaper, roadmap, and tokenomics before investing.
  • Verify official sources: Double-check URLs and social media handles to ensure you’re interacting with the official project channels.
  • Check community sentiment: Gauge the opinions of other investors through forums, social media, and trusted review websites.
  • Look for endorsements: Legitimate projects often have endorsements from reputable figures or partnerships with well-known companies.
  • Assess the project’s transparency: Trustworthy projects will typically provide regular updates, maintain open communication channels, and offer clear explanations of their technology.

Avoiding common crypto scam tactics

  • Be wary of unsolicited offers: Ignore unsolicited messages, emails, or phone calls promoting investment opportunities.
  • Avoid “too good to be true” opportunities: Steer clear of schemes promising unrealistic returns or guaranteed profits, as they are likely scams.
  • Don’t fall for pressure tactics: Scammers often use high-pressure tactics to force quick decisions. Take your time and conduct research before making any commitments.
  • Verify celebrity endorsements: Just because a famous person appears to endorse a project doesn’t guarantee its legitimacy. Verify the endorsement through official channels.
  • Beware of phishing attempts: Be cautious when clicking on links in emails or messages, and ensure they direct to the intended destination. Double-check the URL and look for signs of phishing, such as misspelled words or unusual characters.

Consequences of Losing Life Savings in Crypto Scams

Emotional and psychological toll

  • Stress and anxiety: Losing one’s life savings can lead to immense stress and anxiety, with long-lasting effects on mental health.
  • Depression: The financial devastation caused by crypto scams can result in feelings of hopelessness, leading to depression.
  • Loss of trust: Victims often lose trust in others and may become overly cautious or paranoid about future investments.

Financial consequences

  • Difficulty recovering funds: Crypto transactions are often irreversible, making it challenging to recover lost funds.
  • Impact on retirement: Losing life savings can jeopardize retirement plans and force individuals to work longer or change their retirement lifestyle.
  • Strain on relationships: Financial loss can put significant strain on personal relationships, leading to tension, conflict, and even breakups or divorce.
  • Lengthy legal battles: Pursuing scammers can involve lengthy and expensive legal processes, with no guarantee of success.
  • Reporting requirements: Victims may need to report the loss to authorities, which can be a time-consuming and emotionally draining process.
  • Tax implications: Depending on the jurisdiction, victims may still be responsible for taxes on their lost assets or face challenges when claiming the loss on their tax returns.

Lessons learned

  • Importance of due diligence: The consequences of losing life savings in crypto scams underscore the need for thorough research and due diligence before investing.
  • Risk management: Diversifying investments and setting stop-loss orders can help mitigate the impact of potential losses.
  • Promoting awareness: Sharing personal experiences and lessons learned can help others avoid falling victim to similar scams in the future.

FAQ about Tom Brady and Crypto Fraud

  • Q1: How much is Tom Brady worth?

A: According to Barron’s, Brady’s net worth as of Jan 2023 was around $512 million if you combine his on- and off-field earnings.

  • Q2: How much money did Tom Brady lose in crypto?

A: When FTX filed for bankruptcy, Tom Brady is estimated to have had a stake of 0.14% in the company, resulting in a loss of around $45 million, according to analysts at Forbes.

  • Q3: What is crypto fraud?

A: Crypto fraud refers to various scams and deceptive practices that target cryptocurrency users and investors.

  • Q4: How to report crypto scams?

A: Victims of crypto scams can report them to law enforcement agencies and use online resources specializing in scam reporting and support.

  • Q5: Where to report crypto scams?

A: In addition to contacting law enforcement, victims can report scams to online platforms like the FTC, the SEC, and other relevant authorities or organizations depending on their jurisdiction.

  • Q6: Can crypto fraud loss be reported during tax returns?

A: In some cases, victims of crypto fraud may be eligible to claim their losses as a deduction on their tax return. Consult a tax professional for guidance specific to your situation.

  • Q7: What happens if you get scammed in crypto?

A: If you fall victim to a crypto scam, it’s essential to act quickly. Report the incident to the appropriate authorities, track your transactions using tools like Etherscan and BSC, and collaborate with law enforcement and cybersecurity experts to increase the chances of recovering your assets.

Remember to always be cautious when dealing with cryptocurrency investments, verify the legitimacy of projects, and protect yourself by staying informed about the latest scams and tactics used by criminals. By doing so, you can enjoy the benefits of the crypto world without becoming a victim of fraud.


Conclusion

As the popularity of crypto continues to grow, it’s essential to learn from the experiences of others to avoid falling victim to fraud. By staying informed and adopting responsible investment practices, you can navigate the crypto landscape with confidence.

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