Dear Quentin
Most Read on MarketWatch
Over the past 6 months, I have fallen victim to a cryptocurrency scam. I just retired and he lost $243,000, which I don't think I'll ever see again. I reported this company to the FBI, Federal Trade Commission, and several others. Some of the funds came from a SEP IRA. Is there anything I can do to avoid paying taxes at tax time?
When I first started “investing”, the person who helped me showed me how easy it was to get my money back. What made the operation “interesting” was when he was informed that if he put in a total of $150,000, he would receive VIP treatment and, among other things, help with tax evasion. The company won't let me withdraw the money I put in.
I asked this person to help me invest in crypto futures. That person “helped” me by adding his $40,000 here and his $40,000 there to increase my ability to make money. Last time we added another $100,000. It's a long story, but in short, that's the “help” I received. When I tried to withdraw the money, the cryptocurrency company told me that the government believed I was laundering money.
They now say I need to pony up 15% of my “profits”, or $150,000, to pay taxes. The company said this will be refunded so that I don't suffer any loss. I stopped there and contacted the FBI and FTC. Now the cryptocurrency company is saying that if I don't pay the money right away, my account will be frozen. I haven't written a reply.
The website looked legitimate
I met this “friend” through Instagram META. We switched from Instagram to Whatsapp and now we know that's no good either. I needed help with a photoshoot, and after a few weeks, the conversation turned to investing. Initially, the funds were sent to what appeared to be a genuine site and transferred to an external account called Cryptonex.com.
The real company is actually Cryptonex.org, so I should have done my homework. The fake website looked real to me. It also looked great on the phone where all transactions take place. (On my computer, the headers were all broken. (I've done HTML and SQL programming, so it should have been an easy fix.) The rest of the page looked pretty good.
The company seems to have a very good track record of paying my installments. I don't know yet if it's a scam or not. The FBI has not yet received any communications from his website regarding cybercrime. I have filed lawsuits for both elder fraud (I am 62 years old) and cybercrime. It's very unfortunate that people like this are preying on the elderly.
We don't want to spend the rest of our lives working for minimum wage just to put food on the table. I'm especially upset because I consider myself a fairly educated person. My financial advisor told me that one of her clients lost her $2.7 million to this type of fraud. She can track wallets and she has read that there are all kinds of “companies” that will help you for a fee.
What can you do now?
Was fooled
Related: “I want to do the right thing”: My father died without a will. His wife moved out of state and I ended up paying the mortgage.
Dear scammer
Once a scammer has gained your trust, it is difficult to break that trust.
When people begin to suspect that something is wrong, they learn to suspend their disbelief. This is a terrifying cycle that goes against all logic and, in many cases, everything we've been taught to watch out for. Strangers approach us online with offers that are “too good to be true” or requests to throw good money after bad. . When confidence is lost, fear and despair take over. Keeping the fantasy alive may seem easier than admitting what you've experienced.
This is probably why, even though the fake Cryptonex.com website no longer exists, you are still not sure if it is a scam or not. A spokesperson for Genuine Kryptonex said they had issued a warning about this situation. The warning reads: “There is no need to rush. Scammers often create the illusion of urgency. Make sure the information provided is accurate. Do not share personal information. We will never ask for your personal data.”
Such a confident trick is known as “pig butchering”. It's a mean word for a mean business. Scammers scour social media sites, public records, and dating sites looking for marks. This is called “pig slaughter”. This is because they increase their footprint over time, establish trust, and gradually provide their victims with information that promises bigger and better profits. In the excitement of a big payday, the victim slowly puts his own instincts at risk. And their blood dries up.
According to this warning from Georgia's Secretary of State, “The scammer's goal is not to solicit money from you, but to invest in fake trading websites and platforms that display fake balances that offer large profits. It's about persuading them.” You can withdraw your profits early so you can invest more. “They may even 'lend' you money so you can make a bigger deal.” Fake websites are one of the most commonly used techniques, he said. Learn more about.
Limitations on claiming losses
It is difficult to claim tax losses for such fraud. The Tax Cuts and Jobs Act of 2017 limited personal casualty and theft deductions to federal disasters. There is an exception in the case of pyramid schemes where the losses are considered business theft losses rather than personal theft losses. To do so, the fraudster must be charged with theft, fraud, or embezzlement, and the charges must be dismissed in the same year as the charges. Learn more about the IRS here.
George Dimoff, a New York-based certified public accountant, said he receives about two applications a week from people seeking this type of deduction. There may be some chance, however small, of writing off such losses, he says. “Capital loss claims are the least risky and typically result in relatively small deductions of up to $3,000 per year in capital losses. Of course, this doesn't help victims much, especially given what we have seen so far. This is the case in cases where victims have lost millions of dollars.”
IRS Revenue Procedure 2009-9/20, or pyramid scheme safe harbor, generates a larger deduction of up to 95%, Dimoff adds. “Still, it also comes with potential audit risk and IRS rejections. A customer's situation must be evaluated on a case-by-case basis to determine whether it qualifies for Ponzi loss deductions. Specific tax reporting It is also important for taxpayers to assess their own risk tolerance for potential audits before making any decisions.”
He cited a “lack of clarity” regarding the deduction of investment losses as one of several “deadlocks” created by the 2017 Tax Cuts and Jobs Act. Mr. Dimoff says he has successfully navigated numerous lawsuits involving Ponzi loss deductions, but his interpretation of the IRS tax law regarding fraud may help some victims, but as discussed above. Other victims are of no help. “I don't want to offer general tax advice as a blanket statement or one-size-fits-all strategy,” Dimov says.
At best, it seems unlikely. Please let me know if you have had any success.
If you have financial and ethical questions, you can email The Moneyist at qfottrell@marketwatch.com. You can also follow Quentin Fottrell on X, the platform formerly known as X. twitter.
Monetarists regret that they cannot answer questions individually.
Previous columns by Quentin Fottrell:
“Things have not been easy”: My sister is a hoarder and procrastinator. She is delaying the probate of our parents' estate. what can i do?
“I gave up a job I passionately loved”: My husband secretly set up a trust that included our home and his investments. What should I do?
I have $1.5 million in stocks and bonds. I asked the securities company to convert the bonds into cash. He didn't, so my portfolio went down by $100,000. Can I sue?
check out Moneyist's private Facebook This group seeks answers to life's most vexing money questions. Post your questions and participate in Moneyist's latest columns.
By emailing Moneyist a question or posting a dilemma in the Moneyist Facebook group, you agree to have your question published anonymously on MarketWatch.
By submitting your story to Dow Jones & Co., publisher of MarketWatch, you acknowledge that we may use your story, or versions thereof, in all media and platforms, including through third parties. You understand and agree.
