Scams to look out for when trading Cryptocurrency

Crypto assets and their use continue to grow in popularity and therefore of wider interest to both the public and also criminals. They offer an opportunity for criminals to launder the proceeds of their crime, use them as a commodity in fraudulent schemes and trick consumers.

Crypto transactions have an obvious benefit to criminals as they are immutable. This means they cannot be reversed and therefore if a criminal tricks you into paying crypto to them they are able to keep it with little or no option for you to have it returned.

We cover in this blog a number of different scams and financial crime types to be aware of and ensure you don’t fall victim to them.

Investment scams

Get rich schemes have always been prevalent and are still very high risk. They offer high returns and often claim the investment is being made in a high value commodity to give very high returns in a short space of time.

The commodities used are often Gold, Silver, Stocks and Shares but given the recent dramatic increase in value of crypto assets, they are now becoming increasingly popular commodity for such scams.

These schemes are often promoted or endorsed by high profile individuals or influencers to add extra weight and help the scam take off.

Look out for these common fraudulent schemes make some of the following claims:

  • Guaranteed profits or returns that seem very high compared with other investments
  • Guaranteed returns in very short timescales – This is a red flag
  • Limited information on the nature of the investment and the particular crypto assets being invested in – Most legitimate schemes would be clear on strategy and approach
  • Limited time to invest – or miss out
  • Lack of regulatory approval – Many fraudulent companies deliberately operate outside the regulatory perimeter to avoid detection.

Before you invest, always check that the company and the people involved are legitimate and there are no warnings online. You can check UK registered companies with Companies House for free and look them up on LinkedIn or the company’s own website to establish its validity and those of its staff. You can also search the FCA register to see if a financial institution is approved and also check the FCA guidance on crypto scams which has useful advice and allows you to search for fraudulent firms.

Phone/Text scams

These scammers will contact you via a phone call or more commonly a text message:

  • They claim to be from a government department (e.g. HMRC), your bank, or recently in Covid – a delivery company or the post office, asking for your personal information to allow a delivery
  • They would ask you to confirm your personal information such as your date of birth or address
  • Sharing your personal information can allow them to conduct other frauds or take over your accounts

Money mule

Money mule scams are very prevalent and especially targeted at students or teenagers. They are often pitched as a job offer where they ask the victim to receive and send on payments.

They are likely to ask you to do some of the following:

  • Transfer sums of money or cryptocurrencies to you then ask you to send it back to them
  • Give you a story about your money being part of a set of business transactions or a scheme to allow them to minimise tax bills
  • They might offer to deposit crypto into your account and then request you sell it and pass them the Fiat funds
  • They may let you keep a small part as a reward or as wages if they use the job offer approach

They will not only potentially open you up to criminal charges but also most likely use your details to perpetrate further frauds.

See guidance from UK Finance and CIFAS Money Mules.

Romance scam

Romance scams take place on dating apps or social media sites, where fake profiles are used to find and dupe victims. They use very attractive photos to hook potential victims and set up a dialogue.

They then build up trust and a relationship using direct messaging. These interactions are then used to manipulate the victim. Common methods used are:

  • A shower of compliments to begin with
  • They would mention struggles or setbacks and the help they need from you
  • They may then ask for money to help with this emergency
  • They will find reasons to avoid a face-to-face meeting
  • They provide inconsistent details about their personal circumstances

They use social engineering and manipulation techniques to gain trust and then use this with a substory to extract funds from their victim. They may also by using this technique to get you to act as a money mule as described above.

See guidance from Europol on Romance scams and common red flags.

Also find wider information around Cyber related frauds from Europol, which may be of interest.

What to do if you think you’re a scam victim?

If you think you are a victim of a scam or fraud in the UK, it is best to report it to us and/or your banking provider as soon as possible.

You should report it to Action Fraud who have the lead on fraud reporting in the UK.

They have more information on their website around different fraud types and how to protect yourself from them.

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