Fraudsters often use emotions to lure people in, making a person feel afraid of missing out on an opportunity that others are profiting from. With all the cryptocurrency hype in the media and online, it’s no surprise that scammers are taking note and trying to cash in on investors’ interest in digital currencies.
Cryptocurrency is a virtual currency that was created as an alternative to fiat money. Cryptocurrencies have no inherent value and are not considered legal tender in Canada; their perceived value is based largely on supply and demand in the market. The first cryptocurrency, Bitcoin, was introduced in 2007, and today thousands more digital currencies exist. However, it wasn’t until 2021 that the first crypto asset trading platform was legally registered in Canada. Today, the list of registered crypto trading platforms is growing as more companies seek registration.
Unfortunately, there are many unregistered platforms and fake websites mimicking legitimate companies and scamming people out of their money. In 2021, New Brunswickers reported losing over $1.9M to investment scams alone.
The best way to protect yourself from a scam is to recognize the warning signs and tactics scammers use to lure people into their phony online crypto trading platform. Here are the top crypto-related scams you should know:
Fake Websites
Scammers guide people to fake crypto investing websites, designed to either look like a professional registered trading platform or investment firm. They lure people in through targeted online ads – such as computer pop-ups – claiming unrealistic returns with little or no risk. Scammers may provide realistic-looking documents showing your returns, and may even let you claim your “returns” in small amounts to encourage you to invest even more money. However, when you ask to remove your funds, you will suddenly lose connection with the fraudster, they will ask for more money, say you can’t take your funds out at this time, or the website will disappear. Do your own research into the platform to ensure the company is registered and the website is legitimate, and refrain from clicking on links from pop-up ads or unsolicited contacts. Check to see if the company is registered by using the National Registration Search tool.
Ponzi Schemes
Ponzi schemes are commonly used in investment scams. Individuals are recruited through ads and emails promising high returns in little time. They are asked to provide money up front, and early investors may receive high returns fairly quickly from “interest cheques.” They’re often so pleased with the quick return that they invest more money, or recruit friends and family as new investors. But the investment doesn’t exist. The “interest cheques” are paid from investors’ own money and the contributions of new investors.
Affinity Fraud
Another form of fraud happening in New Brunswick is affinity fraud. A scammer builds trust through a shared connection, and then targets you for a sales pitch. The connection is usually built through a social group, organization, online social networks or religious communities and the relationship can be built over time.
Dating sites
Scammers use platforms, such as dating apps, to pose as someone they aren’t and build an intimate relationship with you. They use these sites to befriend you and, after developing a relationship, will recommend an investment opportunity in crypto assets. They may even provide step-by-step instructions on how to “invest” the money online using a fake website.
Social Media
A popular way for scammers to reach people through social media is to hack a person’s social media account, and, posing as a friend, convince you to invest in a crypto asset opportunity. They claim to have made large amounts of money and you can too – typically encouraging you to act fast before the “special deal” is gone.
Remote Access
Scammers may call a person’s home with a crypto-asset investment opportunity. They may also pretend to be from a reputable company or member of law enforcement and try to convince you they can help you recoup your losses from a crypto asset scam that never existed. In these scenarios, the scammer will convince the person to provide remote access to their computer, compromising their personal and financial information.
Impersonating a Registered Financial Advisor
Scammers are also known to pose as financial advisors and solicit investors. Before parting with your money, check to see if they are registered using the National Registration Search tool and make sure the person you are speaking with is the registered individual and not someone impersonating them.
How to Protect Yourself
While cryptocurrencies themselves are generally not considered to be securities and, therefore, are generally not subject to securities laws, crypto asset trading platforms that hold cryptocurrencies in custody on behalf of their clients are subject to securities legislation and must be registered by FCNB. Check the list of registered crypto asset trading platforms in New Brunswick before you invest. If you are solicited by someone you don’t know, make sure the person you are speaking with is not impersonating a registered individual. Make sure you understand how the investment works and the fees and risks associated with it. Ask questions and seek a second opinion or professional advice if you are unsure whether an investment opportunity is legitimate. It’s important to note that using a registered trading platform can help protect you from fraud, but it doesn’t erase the volatility of investing in crypto assets. Know the risks and do your research before committing to any investment, including cryptocurrency.
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How to Report a Crypto Scam
If you suspect you’re a victim of a crypto-related scam, or attempted crypto-related scam, report it to FCNB by phone or email:
1-866-933-2222
For more information about crypto assets and cryptocurrency, visit FCNB.ca.