Home Bitcoin NewsBitcoin Scam How to spot crypto scams – Yahoo Finance

How to spot crypto scams – Yahoo Finance

How to spot crypto scams – Yahoo Finance

Man behind laptop, man hacker, laptop and personal online security

Crypto scams have risen by 23% in the past year, says Lloyds bank. Photo: Getty (5m3photos via Getty Images)

Major digital tokens like bitcoin (BTC-USD) and ether (ETH-USD) have rallied in the past few weeks, however, crypto scams are on the rise, according to Lloyds Bank.

Lloyds Bank (LLOY.L) has warned that a growing number of British investors risk being defrauded by a wave of fake cryptocurrency adverts posted on social media. According to Lloyds, 66% of all investment scams start on social media, with Instagram and Facebook (META) the most common sources.

These scams include a mix of bogus ads, fake celebrity endorsements, and the targeting of consumers through direct messages. A Lloyds spokesperson added that the number of cryptocurrency investment scams reported by victims so far this year has risen by 23%, compared to the same period in 2022.

Read more: How will AI change the world of scamming? | The Crypto Mile

“Predictably, social media platforms are the main breeding ground for this type of scam, with a mix of bogus ads, fake endorsements, and cloned accounts being key to fraudsters’ methods. Crypto is a highly risky asset class and remains largely unregulated, which makes it an attractive area for fraudsters to exploit. If something goes wrong, you’re unlikely to get your money back,” Lloyds Bank fraud prevention director Liz Ziegler said.

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Crypto investment scams

According to the analysis from Lloyds, the average amount lost in cryptocurrency investment scams is more than any other type of consumer fraud. Victims of crypto scams on average lose £10,741, up from £7,010 last year, more than any other type of consumer fraud, such as romance scams or purchase scams.

The most common age range for crypto scams is younger investors, mostly in the age bracket between 25 and 24. The primary ruse used to trick this demographic seems to be the enticement that crypto could be a way to “get rich quickly.”

Read more: Can you live in London for 24hrs using only bitcoin?

Lloyds Bank says that crypto investors usually take around 100 days to complain that they have been scammed, but by this point, the money is usually long gone, and impossible for the bank to reclaim. If a consumer pays into a crypto scam via bank transfer, it’s very hard for the bank to get their money back.

Crypto scam warning signs

The UK’s Financial Conduct Authority, FCA, has said that since early October they have issued 221 alerts about potential cryptocurrency scams. The UK’s financial regulator has created a Warning List that is continually updated where crypto firms that may be illegally communicating cryptoasset promotions are identified. The FCA recommends consumers should check their Warning List before making any crypto investment. The regulatory body added that people who invest in crypto, “should be prepared to lose all their money.”

Lloyds says crypto scammers set up fraudulent traps through a variety of means including setting up fake companies, social media profiles, and websites to clone real firms. They may even produce investment literature that looks professional.

Investors can also be tricked by fraudsters posing as “investment managers”, who tout promises that any payments made by the victim will be invested on their behalf, often with the promise of huge returns. Sometimes victims can even be shown a fake investment account, suggesting that the funds are already making a profit.

Read more: Worst crypto scams and ‘coverups’ of 2022

Other scams involve fraudsters using legitimate platforms, like Coinbase (COIN) or Binance, that are opened on behalf of the victim. However, once funds have been deposited to these legitimate platforms, victims may be tricked into handing over their account login details or passing control of their digital wallet over to the fraudster.

Tips for staying safe when interacting with the crypto sector

Consumers need to be wary of social media, as fraudsters often send direct messages to victims with the promise of large returns or claims about “guaranteed” profits. If consumers are contacted out of the blue about an investment, it’s likely a scam.

Fake companies set up by fraudsters are common. So it is important to check whether the website is legitimate. It is best to Google (GOOGL) the name of legitimate cryptocurrency exchanges and beware of clicking on any links that are sent via direct message from possible fraudsters.

Young Asian woman using smartphone against illuminated digital display in city street at night. Blockchain technology. Trading cryptocurrency.  NFT (Non-Fungible Token) investment.Young Asian woman using smartphone against illuminated digital display in city street at night. Blockchain technology. Trading cryptocurrency.  NFT (Non-Fungible Token) investment.

People wanting to invest in crypto should check on the FCA website to see if the company they are thinking of investing in is legitimate. Photo: Getty (Oscar Wong via Getty Images)

Since 8 October of this year marketing of crypto in the UK has been regulated by the FCA. In time this should weed out more fraudulent activity and make it easier to spot genuine crypto ads. According to the FCA, whenever you invest in crypto you should see prominent warnings about the risk of losing your money, and you shouldn’t be offered any free gifts to join or refer a friend bonuses.

Those who indulge in the cryptocurrency sector are advised to not share their login details or private cryptocurrency keys with anyone else. A legitimate firm would never ask you for these details.

Avoid hype driven crypto tokens

Investors often face the fear of missing out (FOMO), driven by the urgency to act swiftly amid suggestions of a limited time window for buying before prices surge. Live graphs on investment platforms contribute to this hype, displaying real-time fractional price changes.

Limited opportunities, such as investments in risky start-ups or trendy cryptocurrencies, fuel FOMO by creating a sense of exclusivity. Possible fraudulent messaging emphasises scarcity, like “once-only opportunity” or “when they’re gone, they’re gone.” This intensifies the pressure on consumers to make hurried decisions.

Read more: How to safely transfer your crypto to a cold storage wallet

External influences, including endorsements from influencers and celebrities add to the hype, leveraging their sway over audiences. Peer pressure from friends and family can also amplify the FOMO experience, as individuals may feel compelled to join the hype based on recommendations that may lack reliability. Emotional decisions in this hype-driven environment can lead to costly investment mistakes, emphasising the importance of careful consideration.

Volatility of the crypto market

Apart from scams, investors should be aware of the volatility of the cryptocurrency market. According to the Financial Conduct Authority, investing in crypto requires caution due to the market’s inherent volatility and unpredictability. Determining the long-term potential of cryptocurrencies is challenging, as their values can fluctuate suddenly, influenced by factors like social media posts and government regulatory policies.

Read more: Blockchain and NFTs: How to make sense of crypto terminology

A prime example is bitcoin’s drastic price collapse between November 2021 and December 2022 when it plummeted over 73% from around £55,000 to £13,724.

Bitcoin has rallied by over 100% since the beginning of this year. And is currently priced around £30,000, up 30% in the past month. Bitcoin indicates the sentiment towards cryptocurrency in general. Many altcoins with a smaller market cap than bitcoin experience much more volatility.

Watch: US crypto crackdown ‘an opportunity for the UK’ | The Crypto Mile

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