Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
Cryptocurrency: how to protect your pockets from rising number of crypto criminals
Moneymagpie Team
14th Sep 2021
It is Take Five Week (13-17 September), and Take Five to Stop Fraud is warning people to protect themselves against cryptocurrency investment scams perpetrated against unsuspicious would-be investors.
We know that criminals are always looking for the next lucrative opportunity and search trend analysis, conducted for the Take Five campaign, shows there has been a surge in interest in crypto investments. In May 2021 there was a ten-fold increase in UK Google searches for the phrase ‘invest in crypto’. Year-on-year searches rose from 25,210 (May 2020) to 340,460 (May 2021), and this is just the type of interest that criminals seek to exploit, as they have done and continue to do over the years.
Tony Blake, former Police Officer and Take Five Fraud Expert, shares the lowdown on cryptocurrency investment scams: what to look out for, what tricks criminals use and how to protect your finances.
- What is crypto?
- Common cryptocurrency scams to watch out for
- Considering investing in cryptocurrency? It’s important to remember…
- Protect your finances
- You can learn more about cryptocurrency scams here.
What is crypto?
Cryptocurrencies are digital currencies that use cryptography to generate ‘tokens’ and verify the transfer of these tokens between people. Cryptocurrencies are known for their market volatility so the value of investor’s assets go up and down quickly. Criminals have taken advantage of the unregulated nature of cryptocurrencies to scam consumers.
Criminals benefit from the turbulence of the cryptocurrency markets, rushing people into parting with their money, pretending they are buying in at the right time.
Find out more about cryptocurrencies, what they are and how to invest in them here
Common cryptocurrency investment scams to watch out for
Criminals are using ever more sophisticated techniques and adapting their approaches to lure people with ‘too good to be true’ offers.
Common across all these scams is being contacted by phone, email or social media about an opportunity using aggressive techniques and incentives to buy before certain deadlines. You might be told you’re buying in at the perfect time and pressurised into making a decision with no time for consideration. All under the guise of ‘if you don’t act now, you’ll miss out’.
There are many ways in which criminals can attempt to trick you into parting with your money. Some of the common ones banks have been reporting to UK Finance include:
Celebrity endorsement:
Many cryptocurrency investment scams are advertised online via social media networks, often with fake celebrity endorsements or personal testimonies promising potential investors easy money, fast. Often the celebrities may not even know their name or photograph has been used.
For example, ‘Arun’* saw a ‘celebrity endorsed’ social media post advertising the promise of big returns on Bitcoin. He contacted the company and following a phone call with a “trader’ was convinced to make a payment of £300. After logging into his trading account on the website, he saw his investment increase. Arun continued to invest more money following pressure from another “trader” from the company and was persuaded to take out a loan sourced by the criminal. Arun only realised it was a scam when he was unable to access his account to withdraw his money or contact the company.
Mining scheme scam
Criminals may contact you with a lucrative deal: make money by simply running software on your computer or phone. After paying an initial fee to create their account or improve their current mining system, victims are unable to access their account or contact the salesperson – discovering the mining operation that does not exist.
For example, ‘Emma’* had owned cryptocurrency for a few years and the value of her investment had gone up and down. Some of Emma’s friends got into crypto mining, and they said it was a great opportunity to make passive income on the side, without much effort or knowledge.
Having joined a mining group on social media to find out more, Emma was contacted by a ‘successful cryptocurrency trader’ who offered her fixed returns for an investment in a mining programme. Emma transferred some of her cryptocurrency to the trader, but she realised she had fallen for a scam when the trader became uncontactable.
Find out more about bitcoin mining here
New coin scam:
Similar to the mining scams, criminals encourage victims to buy a brand new cryptocurrency coin. With promises of a high return on their investment with apparently little or no risk. Once the victim buys ‘the coin’ they are unable to access their currency or contact the criminal.
- You’re contacted by phone, email or social media about an opportunity using aggressive techniques and incentives to buy before certain deadlines
- You’re told your buying in at the perfect time. You may be offered
- You’re pressurised into making a decision with no time for consideration
For example, ‘Jadon’* had heard loads about cryptocurrency traders putting money into Bitcoin years ago and making a fortune. The influencers he followed on social media encouraged everyone to get involved. He went online to do some research and concluded he needed to invest in a new coin to make the most money.
Jadon saw an advert for a new coin and found it on a brokerage site. The advert said he could triple his money in months and that the makers of the coin had an office in London. Jadon put most of his savings into the coin as he wanted to maximise his returns, and he was told he wouldn’t lose anything as he was buying in at the start. It only dawned on Jadon that he had been a victim of a scam when his account stopped working and he was asked to make another payment to access his funds.
*These case studies are based on insights from UK Finance partners and based on real stories
Considering investing in cryptocurrency? It’s important to remember…
- Crypto assets are nothing like money. Before you consider buying any, do plenty of research such as, checking if the company registration number is clearly stated so you can check them out on Companies House. This is only valid for those companies registered in the UK.
- Most cryptocurrencies aren’t regulated by the FCA which means they’re not protected by the UK’s Financial Services Compensation Scheme. If you are scammed it is unlikely you will recover any of your money.
- Even if your friends or family are investing it doesn’t necessarily mean it’s safe. You cannot call your provider to recall your transaction as you would if you were using a credit card.
- Aggressive, opaque and/or unrealistic approaches, incentives to buy before a specific deadline and minimum order levels can be a sign of a scam. Most reputable exchanges won’t adopt these tactics and allow for as little as £1 purchase of crypto.
- Report scam adverts that appear in paid-for spaces online by visiting the Advertising Standard Authority’s website where you can complete their quick reporting form.
Jasmine regularly runs webinars on how to invest safely into cryptocurrencies. Sign up to her next one here
Protect your finances
If something goes wrong with a cryptocurrency investment you are unlikely to get your money back, because they mostly aren’t covered by the UK’s Financial Services Compensation Scheme.
Take Five is urging people to stop and question situations when they could be faced with a potential cryptocurrency scam.
If you are unexpectedly contacted about an investment opportunity, to make sure it’s not a cryptocurrency investment scam you need to:
- STOP: Take a moment to stop and think before parting with your money or information could keep you safe.
- CHALLENGE: Could it be fake? It’s ok to reject, refuse or ignore any requests. Only criminals will try to rush or panic you.
- PROTECT: Contact your bank immediately if you think you’ve fallen for a scam and report it to Action Fraud.
You can learn more about cryptocurrency investment scams here.
If you believe you’ve fallen for cryptocurrency investment scams, contact your bank immediately on a number you know to be correct, such as the one listed on your statement, their website or on the back of your debit or credit card.
Report it to Action Fraud on 0300 123 2040 or via actionfraud.police.uk. If you are in Scotland, please report to Police Scotland directly by calling 101 or Advice Direct Scotland on 0808 164 6000.
Informative article.