The financial Conduct Authority has launched investigations into 52 companies after claims that mis-selling, fraud and pressure selling from people being mis-sold bad cryptocurrency investments.
The FCA has received a flurry of complaints to its consumer helpline. In October 343 calls were made from people who had been ripped off from bad investments. Cryptocurrency such as Bitcoin has increased in value and is continuing to hit record highs, attracting investors but also scammers who are increasingly targeting people looking to make some money.
At the beginning of the year the FCA warned that consumers should know what they are doing when investing in cryptocurrency or be prepared to lose all their money if not. They urged consumers to understand what they were investing in and the financial risks involved and that if they invested in a company that goes bust, they would be unlikely to receive their money back. They went on to say that a large number of companies were overstating the returns people could make on investments, and to stay clear of companies and advertisements offering high returns on investments.
The Financial Conduct Authority required non-registered crypto businesses to register with the regulator by January 10 this year and businesses that failed to do so would come under FCA scrutiny. The cryptocurrency market is extremely volatile which makes them a high-risk category for investors. It is also a relatively new market which means low levels of regulation are in place to monitor it. Because of this it is too easy for fraudsters to set up bogus companies and even fake currencies.
Cryptocurrency scams the top four:
The promise of immediate high returns can make people eager to take a risk on a cryptocurrency investment. But what happens more often than not is innocent investors are lured in by making small but significant profits on smaller investments, and once they start investing more and more a scammer will leave them with nothing and pocket the lot.
- Fake exchanges – investment opportunities of Bitcoin and other cryptocurrencies being marketed on social media and via email – these will send you to fake exchanges which can often disappear overnight. Make sure websites are HTTPS secured – although this is no guarantee the site is genuine – but the most important thing is to do your research and seek out reviews of sites.
- Fake wallets – wallets are primarily about storing your cryptocurrency and not buying or selling it. Fake wallets are scams for malware to infect your computer to steal your passwords and other personal information. They are not easy to spot but sites like Bitcoin.com, for example, do recommend wallets for mobile and desktop users and provide a simple, secure way to send and receive bitcoin.
- Phishing scams – phishing is when someone tries to trick you into thinking that a website or company is genuine. Scammers will often encourage you to make a transaction, but this will be fake, meaning you will lose your money as a result. Alternatively, it could be an opportunity for scammers to place malware on your device to steal your personal details.
- Ponzi scams – Ponzi scams usually involve making strong or unrealistic claims about the returns you can make by investing in cryptocurrencies. They often have referral programmes to encourage investors to sign up their friends and families. In reality, most people will lose some of all their money in these types of schemes.
The best way to avoid these types of scams is to stay safe online, protect your data, do not open unsolicited emails and fully research anywhere or anyone you are thinking of investing your money with. And look out for anyone guaranteeing to make you money, promising big pay-outs, offering free crypto cash, if something sound too good to be true, chances are it is.