Cryptocurrency and foreign exchange investment scams saw victims in the UK lose £27 million in the last financial year, new figures show. According to the UK’s national centre for reporting cyber-crime, scams tripled in number from the previous period, suggesting the public is becoming increasingly susceptible to promises of getting rich quick via crypto investment.
The scale of the losses are massive, with the average victim losing £14,600, and in many cases those victims will also have persuaded friends and family to invest too. The figures were published as part of a warning by Action Fraud and the Financial Conduct Authority (FCA), the City regulator, about the scams. Fraudsters lure victims by promising high returns from investments in cryptocurrency — a type of product of which Bitcoin and Litecoin are among the most well known — and foreign currency trading.
Research from the FCA earlier this year found that people went into cryptocurrencies for all the wrong reasons, and getting rich quick was one of the main motivations for buyers — so it’s not surprising that scammers are capitalising on this. Once the victim is persuaded to invest — often through professional looking websites they find through adverts on social media — investors are often led to believe that their first investment has successfully made a profit. The fraudster will then contact the victim 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.
What you should know about crypto-currency investing
You can purchase Bitcoins either from exchanges, or directly from other people via marketplaces. It’s an extremely volatile investment. For example, this week the price of Bitcoin has fallen below $8,000, bringing to an end a record-breaking rally that saw the crypto-currency’s value more than double in May. Owing to the lack of regulation, there is no compensation or protection for investors if things go wrong. Risks of hacking and money-laundering are also major concerns.
CryptoUK, which was set up last year as a self-regulatory body for the crypto-currency industry, wants this sector to be regulated to provide greater certainty and to adequately protect consumers. For those who dare to invest, it’s important to do it safely, knowing all the risks and doing so with a genuine company – and not handing money over to fraudsters. Here are five ways to avoid being scammed:
1 Don’t trust the internet
Consumers typically lured into bogus ‘get rich quick’ schemes advertised on social media. Fake celebrity endorsements and images of luxury items such as expensive watches and cars are typically used to entice victims to part with their cash. But remember, professional-looking websites, adverts or social media posts do not mean that an investment opportunity is genuine. Criminals can use the names of well-known brands or people to make their scams appear legitimate.
2 Avoid uninvited investment offers
If a company approaches you out of the blue, through social media or on the phone alarm bells should ring.
3 Ignore claims of zero risk
If anyone is offering incredible overnight returns without risk, it’s a scam.
4 Research any investment
If you are thinking about making an investment, thoroughly research the company first and consider getting independent advice. Firms providing regulated financial services must be authorised by the FCA. You can check whether they are authorised on the FCA’s register https://register.fca.org.uk. Use the contact details on the register, not the details the firm gives you.
5 Take your time
If you’re being pressured into making a rushed decision, be on your guard. You might be told there’s a limited offer, bonus or discount if you sign up before a deadline. A genuine and credible investment firm would not likely behave this way and apply any pressure.