Crypto assets continue to arouse interest among both new and experienced investors. However, scammers are enjoying a growing hype and greater availability, promoting fraudulent crypto investments and platforms for those who want to make money.
In a 2022 report, the Canadian Bureau of Statistics has named crypto scams as one of the fastest-growing crimes, and the Canadian Anti-Fraud Center reported that cryptocurrencies were involved in the most losses from investment scams with $161 million reported in the first six months of 2023 alone.
Fortunately, there are warning signs that can help you to safely detect, avoid, and report fraudulent offers for crypto investments and trading platforms.
Warning Signs of Crypto Investment Fraud
Unregistered Crypto Trading Platforms:
One of the most important steps you can take before investing in cryptocurrency is to make sure that the trading platform you are using is registered by the securities regulators in Canada. If no crypto trading platform is registered, there is no guarantee that any of the typical investor protection measures that may exist when using a registered trader are in place.
These protective measures are used to address issues such as the safe handling of customer funds, the security of the customer’s assets, the protection of personal data, the disclosure of information before a transaction, as well as measures against market manipulation and/ or unfair trade. Remember, even if you use a registered platform for trading cryptocurrency, you should know that scammers often direct victims to buy cryptocurrency on a registered platform, and then transfer the cryptocurrency to them under the pretext of getting a better return or reducing trading fees through their trading platform. Once you have transferred your cryptocurrency to these not known people or unregistered trading platforms, the cryptocurrency will usually disappear forever.
Unsolicited proposals for investing in cryptocurrency:
Random and unplanned investment opportunities in cryptocurrency can be offered in person and most often through online social networks dating apps, chat forums, websites, and advertising.
These offers are usually fraudulent. Also beware of those who promote the opportunity who want to communicate through messaging apps such as Telegram, WhatsApp or Signal.
Remote Access Fraud:
Scammers offering crypto investments online may try to convince you to give them remote access to your computer to help you create crypto accounts or to buy/transfer crypto assets or cash. This is a common method of stealing personal information from scammers, including bank account numbers and passwords. Remote access software called AnyDesk is often used for these vile schemes.
Exceptional returns with minimal or no risk:
If that sounds too good to be true, it usually is. Crypto or not – all investments carry a certain risk. A general rule of thumb is that the higher the risk, the higher the potential returns or losses, but there is no guarantee that a high-risk investment will yield a return.
Scammers often make exaggerated income statements, which you can get by investing in their offer for crypto investments or through an unregistered crypto trading platform. Avoid investment offers or crypto trading platforms that guarantee high returns with minimal or no risk at all.
Cryptocurrency Recovery Systems:
If you have previously been the victim of a crypto investment scam, do not contact anyone who claims that they can find or return your crypto assets or funds. Neither their fees nor their services are legal.
Chances are now or never:
Investment scams that claim to be a limited-term offering or have a deadline are designed to create a sense of urgency that prevents you from doing thorough research. Ignore all urgent and exclusive investment offers and always take the time to investigate the legality of each investment you are considering and whether it is in line with your risk tolerance and financial plan.
Catchy optics:
Attractive or professional-looking trading platforms do not mean that they are legitimate and work in regulatory terms. Although the first impression is important, promotional materials such as social media advertising, reviews from potential customers, celebrity endorsements, and websites can be easily produced.
Nothing replaces the verification and confirmation of registration on the cryptocurrency trading platform.
Difficulties with the withdrawal:
If a crypto investment requires additional fees or taxes to deduct your earnings, it is most likely a fraudulent scheme. Victims often pay more money when they try to return the lost money, only to find out later that they have been scammed even more. Never pay additional fees for the refund of your original investment.
Pyramid systems or Ponzi:
People tend to lose their vigilance in the circle of their family and friends. However, victims often unknowingly become victims of fraud by people they know and trust.
Be wary of opportunities to invest in cryptocurrencies based on hiring and promising bonuses or higher returns, depending on the number of additional people being brought in. These systems work similarly to pyramids or Ponzi schemes and will eventually crash when much of the “invested” money passes to the scammer.
Tips on How to Avoid Crypto Scams and Scams
Regardless of whether you are interested in cryptocurrency or not, there are reliable ways to protect yourself from fraudulent investment offers and scammers looking for your next destination.
Improve your online privacy:
Scammers patrol social media sites to look for targets for scams. Make your social media accounts completely private to limit the amount of personal information that is accessible to anyone you don’t know or trust.
Check before you invest:
Confirm the registration of each crypto trading platform you want to use on our “Investing in Crypto Assets” page or on the “Regulation and Enforcement for Canadian Securities Administrators Crypto Trading Platforms” page before investing.
Investors should also familiarize themselves with the CSA’s investment warnings. This page indicates individuals and companies that appear to be engaged in securities activities that may pose a risk to investors.
If that sounds too good to be true…:
Each investment is associated with a certain risk. If you can’t see any risks in an investment offer and the returns seem attractive, you may be dealing with fraud. The higher the potential return of an investment, the higher the risk – there are never guarantees.
Contact the ASC:
If you or one of your acquaintances has received a suspicious offer to invest in cryptocurrency, or if you believe that you have been scammed by a crypto scam or a fraudulent cryptocurrency trading platform, contact the Alberta Securities Commission (ASC)
