Victims lost on average over £14,600 due to crypto scams
Losses as a result of “get rich quick” cryptoasset and forex scams exceeded £27m during the 2018/19 financial year, with the number of investors reporting fraud tripling on the previous year’s figures.
Data from the Financial Conduct Authority (FCA) reveals that of the 1,800 complaints it received over the last financial year, victims lost on average over £14,600.
Crypto and forex fraudsters often target potential victims for the so-called “get rich quick” schemes using social media, posting fake celebrity endorsements and images of luxury items like expensive watches and cars, the FCA explained.
Victims will be lured by professional-looking websites and then be led to believe that their first investment has successfully made a profit, at which point fraudsters will convince victims to invest more money or introduce friends and family with the false promise of greater profits.
“However, eventually the returns stop, the customer account is closed and the scammer disappears with no further contact,” the FCA said.
Cryptoassets like Bitcoin have been thrust into the regulatory spotlight over the last two years, with the growing numbers of fraudulent investments adding to concerns about the volatility and lack of transparency associated with the as-yet unregulated products.
The products are currently on route to face regulation in the UK in addition to a Europe-wide approach being developed by the European Securities and Markets Authority (ESMA).
As a result, the FCA is working alongside police group Action Fraud as part of the regulator’s ScamSmart campaign to warn investors of the scams via a new marketing campaign.
Launched in 2018, the online ScamSmart portal gives investors guidance on avoiding fraudsters and a platform to report such abuses.
Director of Action Fraud Pauline Smith said the latest statistics on crypto and forex scams “are startling and provide a stark warning that people need to be wary of fake investments on online trading platforms”.
She added: “It is vital that people carry out the necessary checks to ensure that an investment they are considering is legitimate.”
Executive director of enforcement and market oversight at the FCA Mark Steward added the public should be “suspicious of adverts which promise high returns from online trading platforms”.
He added: “Scammers can be very convincing so do your own research into any firm you are considering investing with, to make sure that they are the real deal.
“Before investing online find out how to protect yourself from scams by visiting the ScamSmart website, and if in any doubt – do not invest.”
Commenting on the figures, Laura Suter, personal finance analyst at investment platform AJ Bell, said investors can carry out a few simple checks before committing their money: “If someone calls you out of the blue – hang up, and if the returns sound too good to be true, they probably are.
“Don’t be lured in by an impressive-looking website or any celebrity endorsements, and if your friend recommends something to you, don’t assume that they’ve done all the research for you. Finally, you can check on the regulator’s register to see if the company is legitimate.”