What are the red flags of crypto fraud?

You may have seen news stories about the changing value of various crypto assets. And you may be curious about whether investing in crypto could lead to a high return.

If you are considering investing in crypto assets, always work with a registered crypto asset trading platform (CTP). These platforms are subject to regulatory requirements that helps protect investors. When you give money to an unregistered CTP, you could be giving your money to a fraudulent CTP and in that case, there is typically no way for anyone to get it back. 

There has been a significant rise in investor complaints about crypto-related scams. There are several warning signs of crypto fraud, including:

1. Fake websites: Fraudulent crypto assetAsset Something of value that a company or an individual owns or controls. Examples: buildings, equipment,…+ read full definition trading platforms can look very similar to legitimate sites, making it difficult for you to tell the difference. These websites’ polished look may lure you into sharing personal information, financial information, and crypto wallet passwords that end up in the scammer’s hands. Often these websites use a lot of jargon and have no contact details. In some cases, these platforms mimic a legitimate platform by name and appearance but are used to phish information from you.
2. Fake social media posts: You may see on social media postings from influencers or celebrities endorsing particular crypto assets or legitimate sounding crypto asset trading platforms. These posts may be digitally altered or created using artificial intelligence tools (known as “deepfakes”) to sound like the message is coming from a trusted source to direct you to these assets or platforms.
3. Celebrity faces: Just because you see a celebrity’s photo on promotional materials, it does not mean the famous face is knowledgeable or actually endorses the company.
4. Unsolicited phone calls, texts, emails and direct messages via social media platforms: You keep getting contacted by someone trying to get your personal information such as your crypto wallet details, banking information or to get you to send money or crypto assets. You may also be contacted by someone pretending to be with law enforcement or the government asking for payment in crypto.
5. No trading experience needed: You’re told not to worry about a lack of trading knowledge. They tell you it’s all done automatically for you, so you don’t need to know anything.
6. Asking for access to your computer: You’re told to download an app on your computer or phone (such as AnyDesk, Teamviewer) that actually gives the fraudsters access to your computer (often called a “Trojan horse” tactic).
7. Too good to be true: You’re offered an unbelievably low price that’s below market valueMarket value The value of an investment on the statement date. The market value tells you what…+ read full definition. And you may be guaranteed unrealistically high returns over a short time frame, such as 50% return on your investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition in two months.
8. Paying more to get less: You’re told you must provide more money before you can make any withdrawals.
9. Early returns hook: You investInvest To use money for the purpose of making more money by making an investment. Often…+ read full definition a small amount that appears to earn a good return, so you invest much more, only to find out later that your entire investment has disappeared.
10. Disappearing act: You can’t reach anyone when you make a request to withdraw money.

If you are concerned about a crypto scamScam When someone tries to make money by misleading or tricking another person.+ read full definition, contact the OSC using the online form, or call 1-877-785-1555 or email inquiries@osc.gov.on.ca.

Crypto assets are generally considered high risk. Purchasing crypto assets is a speculative activity and their value and liquidityLiquidity Refers to how easy it is to change an investment or asset into cash, without…+ read full definition are highly volatile.

What are examples of crypto fraud?

The OSC Contact Centre has had a large increase in crypto-related complaints. The experiences of people who have lost money in crypto-related frauds include:

• A costly click – Warren was intrigued by online ads offering fantastic profitsProfits A financial gain for a person or company. Equals the money left over after you…+ read full definition in crypto. The dentist clicked on one ad and invested a small amount. He was impressed by how much his offshore online accountAccount An agreement you make with a financial institution to handle your money. You can set…+ read full definition was making. Being careful, he successfully withdrew $500. Warren then invested $25,000, confident his investment was safe. Later he tried to withdraw $3,000, and he was told to pay $1,500 to cover fees. After paying, the company stopped responding to his emails and Warren never recovered any of his money.   
• A disappearing act – Sally met Harry on an online dating app. Harry told Sally he owned properties and traded crypto assets for hundreds of clients. He offered to invest for her too and said he would not charge any commission. On his instruction, she used a bitcoin ATM to send funds directly to his digital wallet. Harry said her investment grew dramatically. Sally sent more money, until all her $300,000 was “invested.” Suddenly, Harry was gone and Sally’s money too — without a trace. 
• A famous face – Tannis saw an online crypto ad with a picture of someone famous. Intrigued, she clicked the link, provided her contact information and invested. When she tried to withdraw her crypto assets, they told her to pay more money for “taxes and marginMargin A way to buy investments by borrowing money from a stockbroker. You must also invest…+ read full definition issues.” She paid but then was unable to reach anyone or access her account. 

In most cases, when people have had their money taken by a fraudster it’s gone for good. Their money cannot be retrieved. If someone connects with you later promising to help you get your money back, it could be a recovery room scam.

It’s very difficult to get crypto assets back once they have been transferred to another address outside of your control. Complicating factors include how challenging it is to identify the person(s) in control of blockchain addresses and the use of tools that make tracing the transfer of crypto assets difficult.

Financial fraud can be a stressful and time-consuming experience. It can affect you both financially and emotionally. Find out what to do if you have been defrauded.