Do I Have to Pay Upfront Taxes and Fees Before Withdrawing Cryptocurrency?

Over the past few months, it has become one of our client’s most frequently asked questions. Do I have to pay upfront taxes and fees before withdrawing cryptocurrency? There is only one answer to this question: No, you do not need to pay upfront taxes, commissions and fees. In this article, we’ll explore the types of “taxes”, commissions, or “fees” these scammers will claim need to be paid so you can withdraw your funds, such as:

• Tax Payments
• AML (Anti-Money Laundering)
• LC (Liquidity Checks)
• Syncing Crypto Wallets

If someone asks you to pay upfront taxes and fees before you can withdraw your cryptocurrency, they are a scammer. Importantly, this means that any money you may have “invested” with them instead went directly into the fraudsters’ pockets. While that may be hard to swallow, there simply is no “profit” or “gain” for you to withdraw. And no amount of “taxes” or “fees” you pay is going to get your money back. All the scammers are trying to do is steal even more of your hard-earned cash.

Unfortunately, nobody thinks they can get scammed until it happens to them. These scammers are pros: they know exactly how to present themselves as professionals, appear knowledgeable, and manipulate their targets. So, do I have to pay upfront taxes and fees before withdrawing cryptocurrency? Despite what the scammers say, do not pay any upfront “taxes” or “fees”. Sadly, it’s just throwing good money after bad and will not result in you getting your money back. Instead, contact Cybertrace’s experienced investigators today to discuss how we can help you turn the tables on the scammers. But first, let’s look at how fake upfront taxes and fees work as part of a bigger scam.

Part of a Bigger Scam

With the proliferation of cryptocurrency and forex online trading accounts, investment scammers are having a field day. Typically, they lure potential victims to fake investment websites via targeted ads, social media posts, or direct communications (email/texts/calls). Making promises of “easy money” and “guaranteed returns” that sound too good to be true, they bypass victims’ rational defences. Once the fraudsters have lured victims onto their site or app, they typically ask them to “invest” a small amount. Next, their “account” will show a big early “win” in a short amount of time (say, doubling the initial amount). As a result, victims think their “investment” is growing as promised, and the scammers persuade them to go all in. It’s only when victims want to withdraw their substantial “profit” that talk turns to upfront taxes, commissions, and fees, and victims ask themselves: do I have to pay upfront taxes, commissions, and fees before withdrawing cryptocurrency?

How Do Scammers Make Fake Upfront Taxes and Fees Work?

At this stage, the scammers have already fleeced you of plenty of money and have no inclination to return any of it. Instead, they are trying to squeeze even more out of you now that you have stopped “investing”. But how can they do it? By dangling a potentially substantial gain in front of you, if only you paid some upfront “taxes”, “commissions”, or “fees”.  It’s ruthlessly psychological: they know that you just want to get your money and calculate that you would be prepared to sacrifice another 10-30% to access it. So that you don’t get suspicious, they break them into several “taxes”, “commissions”, and “fees”. In addition, they make them sound official, serious, and plausible: AML (anti-money laundering) tests, LC (liquidity checks), income tax, etc. They sound real, so many people ask themselves the inevitable question. Do I have to pay upfront taxes, commissions, and fees before withdrawing cryptocurrency?

Relying on Impersonation

A current case study might help to illustrate how this works. Our client Mike* thought he had made a substantial profit through online cryptocurrency investments. When he requested a cash-out, a “representative” of a well-known independent blockchain company called him seemingly out of the blue. Said representative told him that the funds were in his Coinbase wallet but that he needed to pass several “tests”. After paying a “fee” to pass an “AML check”, the representative asked him for a “liquidity test”. This involved him transferring an additional 20% of the value of the funds held in his wallet as a “deposit”. This was needed to “release” the funds to him. Needless to say, none of the “fees”, “checks” and “tests” were real and neither was the “representative”. But Mike didn’t know that. He simply asked himself: do I have to pay upfront taxes and fees before withdrawing cryptocurrency?

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What Kinds of Upfront Tax and Fee Tactics Do Scammers Use?

The question, “do I have to pay upfront taxes and fees before withdrawing cryptocurrency”, usually points to a scam. But what kinds of fake upfront tax and fee tactics are there? Are they all scam procedures or are there any that could be real? Unfortunately, the evidence shows that they are all scams.

Anti-Money Laundering Fee. AML laws place important obligations on banks and financial providers to prevent tax evasion and the funding of criminal activities. However, it’s financial institutions that bear these costs, not individual customers. If they suspected you of money laundering, they wouldn’t be asking you to pay a fee. Instead, they would report you to the police who would come knocking on your door.

Upfront Broker, Commission, or Signal Fees. Legitimate cryptocurrency or forex brokers might charge a broker, commission, or signal fee. However, they must spell it out in their contracts and would simply deduct it from your funds. Importantly, they would not require you to pay these upfront. An upfront payment as a condition of the release of your funds is a clear scam warning sign.

Upfront Withdrawal Fee. Again, legitimate brokers or cryptocurrency exchanges may also charge a small (ca. 1%) withdrawal fee when you cash out. However, they would similarly deduct this from your funds, and not require an upfront payment. Upfront withdrawal fee = red flag!

Activation Fee or Liquidity Check. Watch out for these insidious scam tactics! Using complicated logic, bogus technical explanations and false analogies, fraudsters try to pull the wool over your eyes. What this scam tactic, also known as mirror transaction fraud, essentially boils down to is a big con: in order to receive 100% of your money, you must first give the sender 30% of your own. How in the world does that make sense? Needless to say, this is simply another huge money grab!

Tax Fee. The final incredibly common upfront fee scam tactic revolves around a fake 20-30% tax. While we all know that the only certainties in life are death and taxes, who collects the latter? Surely, it’s the tax office or, at most, your employer. Even then, though, they simply withhold it from your earnings, not ask you for an upfront payment. Beware of anyone who isn’t the tax office asking you to pay the tax directly to them – it’s definitely a fraud!

What Can You Do to Protect Yourself from Fake Upfront Taxes and Fees?

It’s important to seek out authoritative advice such as here and here. Do not allow others to talk you into paying fake upfront taxes and fees, no matter how convincing they sound. If you have to ask yourself, “Do I have to pay upfront taxes and fees before withdrawing cryptocurrency”, you know now that it’s a scam. Don’t give these crooks an extra cent of your hard-earned money – it won’t get you anything. Importantly, you now also know that the “profit” you made isn’t real and your “investment” went straight to the scammers. Don’t engage with them any further – instead, contact Cybertrace’s experienced investigators today.

As experienced cyber fraud investigators, cryptocurrency tracers, and forensic website analysts, we have all the tools necessary to turn the tables. Firstly, we can trace cryptocurrency transactions across the blockchain to identify who holds your funds. Secondly, we can pull apart offending websites to identify the masterminds behind them. Thirdly, we can liaise with our network of law enforcement agencies, informants, and international partners to give you the best possible chance of success. Don’t ask yourself, “do I have to pay upfront taxes and fees before withdrawing cryptocurrency”. Instead, hang up on the scammers and call Cybertrace today.