Watch out for these cryptocurrency scams
Crypto has unfortunately become a favourite tool of the scammer in recent times. Action fraud reported in 2021 that early in that year over £146 million had been lost to cryptocurrency scams; a record.
At Refundee we believe that cryptocurrency scams might be the biggest method used by the fraudsters right now. In this blog, we dive into how the frauds work and what to look out for. We have more information on our website about cryptocurrency scams.
Why do scammers use crypto?
Fraudsters have taken a liking to crypto. Traditional approaches they would take to tricking victims into fake investments for example, now often involve an extra step where they trick you into sending your money via a cryptocurrency wallet. They might also use cryptocurrency investments and the huge growth in profits from crypto to entice you into fake investments.
We often see the hype around crypto used to hook in would be investors. The scammers trick people into thinking they are helping them to invest, when really they are stealing their money.
The major thing to watch out for right now is where a fraudster tricks you into sending money to them using a cryptocurrency wallet. There are a few reasons why scammers like to do this:
If they can trick you into setting up your own cryptocurrency wallet and sending the funds to them through cryptocurrency, the money will be hard to trace and they don't have to worry as much about the account being frozen
If the money goes via a wallet in your name, they don't have to spend time trying to set up illegitimate bank accounts which can be a difficult and fruitless process
The banks can easily freeze money stopping them from getting their goods! This does not happen in the same way with crypto wallets and the blockchain, meaning they feel they are more likely to move the funds they have stolen from you quickly
Your cryptocurrency wallet is likely to be in your name
The fraudster will tell you that to invest in their wonderful trading venture you have to set up a cryptocurrency wallet and send the money through it to them. They might even offer to do this for you if you can download some software that lets them take control of your device (don’t ever let them take control of your device!)
Don't be reassured by their statements that the whole thing is legitimate because a wallet is being set up in your own name. They might also point out that only you have the password to this new wallet used for the investment and so it is secure. Their aim is to trick you, so remember that if someone tells you that the only way to invest is by setting up a wallet, you should straight away start from a point of suspicion as this is what fraudsters typically say!
Beware celebrity endorsements as these are often fake
We have all heard of some high profile real life endorsements that have gone wrong! But scammers will use fake reviews and endorsements. Cryptocurrency investment scammers tricking people into fake investments use fake celebrity endorsements to make their programmes look legitimate. We have seen examples ranging from high-profile TV celebrities, fake news articles, and trusted money helpers whose images have all been stolen and used to trick people into cryptocurrency scams.
Many of the most copied celebrities have publicly distanced themselves from adverts, so we recommend digging around Google to see if that endorsement is a lie.
What about social media?
A common fraud is where a friend or close acquaintance either has their social media account hacked or impersonated by a scammer. They will pretend to be them, post stories about how successful they are with cryptocurrency trading or outright contact friends of the acquaintance pretending to be them. They introduce a fake investment, display ‘evidence’ using screenshots of their success and attempt to trick the victim into sending money via a crypto wallet.
If you are contacted by a friend on social media urging you to invest in crypto or posting enticing pictures of trading returns, be on your guard!
Fake trading accounts
It is very easy to buy fake crypto trading software where the deposit amounts can be manually changed by the person that runs it along with pricing and returns. Scammers love this software as it means that they can set up new websites with new names repeatedly in order to trick people using the same methods. This does mean it can be quite difficult to spot the cryptocurrency scams based on the name of the company alone. The key here is that the scammer will trick you into sending money via a cryptocurrency wallet and will show you the returns in the trading account they signed you up for. You will see all of the money in that trading account but unfortunately it is a fake!
Beware these common examples of cryptocurrency scams
Cryptocurrency trading scam
We have described this in some detail above. But the crux of it is that the scammers will contact you with a great trading company they work for or know of that will make big profits trading. Sometimes they just have great insider knowledge of crypto, other times they will be using the latest software that knows when to trade and how to find ‘arbitrage’ opportunities. The companies they use will likely just be a website with some fake reviews and a ‘wallet’ where you can see your account value increasing in value alongside your initial deposits.
Victims usually discover the scam when they try to withdraw their returns, but are told they have to pay large fees, taxes, or ‘upgrade their account’.
Cryptocurrency mining scam
These scams can be quite convincing as they don't need a specialist ‘trading’ element, they just need your money to power their mining efforts. The returns offered are usually guaranteed though and this is a huge red flag you should watch out for. Even the biggest miners cannot guarantee certain returns as the mining of crypto involves solving complex computer puzzles. Nobody knows who will solve the next one! If someone asks for you for money and guarantees you a mining return then it is probably a scam.
Initial Coin Offering (ICO) or new coin scam
This operates in a similar way to the other two common scams, except this time they are selling you a new coin that is going to hugely increase in value and adoption. This is a very popular one with the fraudsters because this situation really does happen. New coins get created, and we have all heard about the latest coin with a 4000% gain. The scammers know this too and so look to use it to their advantage in non-existent coins or ones they have minted themselves that are worthless. If you are approached about new coins to invest in, be extremely cautious as it could be a scam or at least will be extremely risky.
Can I get my money back from a cryptocurrency scam?
If you’ve lost money to a cryptocurrency scam, Refundee can manage your case for you, as an FCA regulated claims management company. If you’d like us to do this for you, start the process by filling out our scam refund claim form. Our fee is 15% plus VAT on anything that we get back, and we don't charge anything if we are not successful. For larger cases, the fee is subject to a maximum of £10k plus VAT per case. Find out more about our fees here.
Remember you don’t need to use a company like Refundee, you could work your case yourself for free! If you’d like to get a refund yourself, you can do this by following our bank transfer refund guide.
