The Rise Of YouTube Crypto Scams, And Where We Go From Here

News, Opinion | July 28, 2020 By:

In April, currency exchange and payment protocol company Ripple sued YouTube, accusing the platform of not doing enough to stop cryptocurrency giveaway scams.

These scammers promise big giveaways to cryptocurrency owners who pay a small sum upfront. The giveaway, of course, never happens. Instead, the scammer pockets the money and leaves the user behind.

How Scammers Are Using YouTube to Steal Cryptocurrency

The general giveaway framework is consistent, but the specifics vary from scam to scam. In some cases, hackers will seize control of big-name accounts and repurpose their platforms for livestreams. In one example, scammers hacked several YouTube pages with large followings. They then changed the pages’ branding and content to impersonate Elon Musk’s SpaceX channel. A livestream broadcast archived footage of Musk and asked viewers to send in bitcoin. 

According to a Bleeping Computer report, the steam was able to secure 15.31 BTC for the scammers — equivalent to more than $150,000 at current prices.

In other cases, they create new accounts to impersonate well-known crypto and tech personalities, like Bill Gates and Ripple CEO Brad Garlinghouse. The scammers then send messages to YouTube users, offering instant payout in exchange for a small upfront payment of XRP, a cryptocurrency created by Ripple. Some scammers promise up to 5 million XRP — more than $900,000 at current market value.

In at least one case, YouTube awarded a “verification badge” to a hacked channel that was impersonating Garlinghouse, according to Ripple’s complaint. As with the SpaceX scam, the hackers pocketed airdropped cryptocurrency and disappeared.

The “free giveaway” model of scam isn’t new. Criminals have used the approach to take cryptocurrency for years. However, there does seem to be an increasing number of these scams, with many high-profile cases making headlines in the past few months alone.

While lawsuits have focused their attention on YouTube, crypto industry leaders have stressed that the platform isn’t the only one being targeted. Garlinghouse, in a thread on Twitter, said that “YouTube’s inertia is indicative of an industrywide problem of a lack of accountability. Victims are forced to jump through hoops to report these scams, and oftentimes that doesn’t even work.”

How Individuals Can Manage Crypto Scams

On an individual scale, whistleblowers may be able to help manage these scams. The SEC allows individuals who report information about violations of federal securities laws to obtain 10-30% of the recovery. In the past, these rewards have been as high as $14 million. 

Greater awareness may also help prevent these scams from working. Staying on top of the latest techniques could help individuals detect and avoid crypto scammers. If a YouTuber promises you a big payment of bitcoin in exchange for a small upfront payment, it’s best to be skeptical. 

Affected platforms are aware of this. Ripple has published a guide on how to spot XRP giveaway scams. 

What Needs to Change to Eliminate YouTube Crypto Scams

Better information can only go so far, however. Scammers are constantly updating their approach, and not every cryptocurrency owner is plugged in to crypto news. It’s likely that action from YouTube will be necessary to manage these scams effectively.

YouTube — along with other social media platforms — is ultimately the actor with the most power in this situation. Improved moderation, faster action and in-platform warnings could help eliminate these scams. It hasn’t done anything yet, though. Lawsuits, like Ripple’s, could convince YouTube and other companies that they need to take responsibility.