A cryptocurrency scam is a fraudulent and illegal activity involving unscrupulous persons using other people’s money to buy and invest in digital currencies.
The Financial Conduct Authority does not regulate cryptocurrencies and associated products and services, making them vulnerable to digital theft and other unscrupulous activities.
Without protection by the Financial Services Compensation Scheme and the FCA’s focus on anti-money laundering, it is unlikely for cryptocurrency scam victims to recover their money.
Types of Cryptocurrency Scams
It would be best for people to learn the different cryptocurrency scams to help protect their money.
- Crypto Scam with Celebrity Endorsement
Scammers know how celebrities are influential in enticing followers to invest in digital currencies.
Some fraudsters develop advertising materials featuring celebrities and social media influencers to promote their crypto investments.
The advertisements contain links connecting to a professional-looking landing page, encouraging people to invest in non-existent instruments using traditional currencies or crypto.
People believe in these investment schemes because their favorite celebrities are product endorsers.
Unfortunately, scammers close their accounts and vanish into thin air as soon as they grow their investment.
Other fraudsters disappear as soon as the first victim pays.
- Phishing Crypto Scam
In this crypto scam, fraudsters send emails to unsuspecting victims, promising them unimaginable wealth by investing in crypto.
The emails contain a link to a landing page, bolstering the company’s claim of significant returns of investment.
The process is similar to a celebrity-endorsed crypto scam – the fraudster disappears as soon as the first victim pays or hits the investment target.
Some phishing scams ask crypto investors for their private keys, allowing fraudsters to access the victim’s cryptocurrency wallet.
Others create a website that looks identical to a legitimate cryptocurrency trading platform.
- Exit Scam
Also known as initial coin offering (ICO), an exit scam hinges on people’s innocence about cryptocurrencies.
Fraudsters tell people they have an all-new cryptocurrency that will be more successful than existing cryptos, such as Bitcoin and Ethereum.
The unscrupulous individuals prepare a convincing cryptocurrency platform, giving would-be victims a venue for investing their hard-earned money.
Unfortunately, once the criminals have sufficient funds from the scheme, they disappear without a trace.
A subtype of an exit scam is the crypto version of a Ponzi scheme.
Fraudsters make money from new members, allowing them to grow their wealth before disappearing.
- Cloud Mining Crypto Scam
People mine cryptocurrencies using super-computers to guess and add the right numbers to a digital ledger.
Crypto miners spend hundreds of thousands of dollars setting up their mining rigs while spending thousands more annually on operating costs.
Unfortunately, some people take this opportunity to exploit unsuspecting persons, especially those who want to mine cryptos.
Fraudsters establish a Cloud-based crypto mining platform, enticing people to mine cryptos without the expensive hardware and costly operations.
Sadly, criminals vanish as soon as they generate enough money from victims.
How People Can Avoid Crypto Scams
People can avoid crypto scams by observing the following measures.
- Safeguard the cryptocurrency wallet by not sharing it with anyone else.
- Ignore cold calls, no matter how enticing the offer might be.
- Avoid get-rich-quick schemes because these are tell-tale signs of a scam.
- Thoroughly research investment opportunities and never give in to pressure.
- Steer clear of social media advertisements, even those endorsed by popular figures.
What Crypto Scam Victims Should Do
Being a victim of any scam is never a good feeling.
Hence, it would be best to act quickly and decisively if they fall prey to crypto fraudsters.
It is wise to contact the bank immediately after realizing the occurrence of a crypto scam.
Victims should also change their security details as soon as possible, especially for those with online banking accounts.
Reporting Crypto Scammers
Crypto scam victims are not the only persons with the right to report crypto scammers.
Even people who see suspected crypto scammers online can report them to the proper authorities.
Reporting any suspected crypto scamming activity is essential to stop these fraudulent companies from victimizing other people.
People in the UK can report any crypto scamming activity to Action Fraud, the nation’s reporting center for cybercrime and fraud.
The FCA also has a consumer helpline (0800 111 6768) for people who would like to report a crypto scam or use the agency’s online reporting system.
People who fear a data breach in the fraudulent activity should contact the Information Commissioner’s Office to investigate cybersecurity issues and impose penalties on erring companies.