Partner Mark Kenkre examines the common types of cryptocurrency scams and methods to avoid them, in the Express.
Last year, it was revealed that Britons lost more than £150 million to cryptocurrency fraudsters with reports of digital crimes jumping by more than 30 per cent compared to 2020. According to Action Fraud, 18-25-year-olds were the hardest hit – perhaps not surprising since nearly a third of the UK’s 2.5 million cryptocurrency owners are aged under thirty.
With such a boom in investor interest, the high-tech nature of crypto is also attracting sophisticated scammers.
So, what are the key warning signs that investors should look out for?
Here are some of the most common types of scams:
- If an individual or online retailer claims that they can only accept Bitcoin or another crypto as payment, it’s probably a scam. No credible organisation demands cryptocurrency as the only means of payment.
- Anonymous/fake identity scams can be quite sophisticated. Using crypto, there are virtually no safeguards to determine who is a good actor and who is a bad actor. It’s really a case of: buyer beware.
- New forms of crypto are constantly being launched in initial coin offerings (ICOs), which scammers can use to offer guaranteed high returns. Avoid anything that is being promoted as a get rich quick scheme.
- Dating apps are rife with crypto scams. Any long-distance digital relationship where one party pressures the other to send money to invest in new crypto is an obvious red flag. Don’t do it.
- Phishing scams aim to gain your private information, like security codes, or trick you into sending crypto to a compromised digital wallet. Don’t be fooled.
- Imposter and giveaway scams involve scammers posing as celebrities, businesspeople, or influencers. They often lure potential targets by promising to match or multiply the cryptocurrency sent to them – a giveaway scam. If it sounds too good to be true, that’s because it is.
- Blackmail/extortion scams claim to have a record of adult websites or other illicit web pages that you have visited and threaten to expose you unless you share private keys or send cryptocurrency to the scammer. Any attempt at criminal extortion should be reported to the Police.
There are many new, evolving risks in the crypto world. To minimise them, stick with beginner friendly crypto exchanges like Coinbase or Gemini. For beginner crypto investors, it may be best to start with the two most popular cryptos – Bitcoin and Ethereum – which have a longer track record than other altcoins.
The best way for victims of a scam to try to recover funds that are lost is by reporting any suspected fraud to the Police and to your bank – the best starting point to see if recovery of your lost funds is possible.
Beyond applying common sense and never parting with your money in a hurry to anyone offering quick or high returns, always protect your private financial information including details about your crypto wallet. Never believe any guarantee that you will make money, achieve big payouts or get free money. Be sceptical, be sensible, and be wise!