Protect yourself against cryptocurrency fraud

Cryptocurrency is a digital or virtual currency. It is unregulated in the UK which means there's no consumer protection and due to its volatile nature, its value can dramatically rise or fall.

Even though certain cryptoassets may be involved in some legitimate investments*, anyone investing in cryptos must be prepared to lose every penny. Unlike cash, which is issued and overseen by the Bank of England and backed by tangible assets, cryptos are developed and run by groups, individuals, or companies. 

Yet despite its risky profile, the popularity of crypto has grown rapidly in the last few years, alongside speculative trading – where people invest in something because they expect it to increase in value and generate a profit. As more and more money has been invested in cryptocurrencies, criminals have quickly followed and exploited its popularity to commit fraud.

Crypto fraud drastically rose last year, and experts believe a key reason for this is its presence on social media, a ubiquitous part of daily life for so many of us. Credible-looking adverts on popular social media platforms, often using fake celebrity endorsements, promise easy money through cryptocurrency or cryptocurrency-related investments. Scammers are also increasingly targeting consumers that are searching for investments online, particularly when they use Google or Bing. 

Typically, these investments promise high returns, but to hook their victims, some offer smaller, more realistic returns to make their offer look legitimate. 

In both instances, victims are persuaded to invest with the fraudster using cryptocurrencies or traditional currencies. They can manipulate software to distort prices and investment returns. These are all ways for fraudsters to get their hands on their victims’ money.

Once victims have invested in a scam, they are more likely to be targeted again by the same criminal or have their details sold to other fraudsters. The follow-up scam may relate to the previous fraud, such as suddenly closing consumers’ online accounts and refusing to transfer the funds, or requesting more money before the funds can be transferred. 

When it comes to these sophisticated scams we all must remain very vigilant.

How to spot a cryptoscam

Cryptocurrency scammers are using both old and new techniques to steal funds through cryptocurrency scams, so you must remain very vigilant.

•    You see adverts online or on social media for crypto investments that promise very high returns. All investment comes with inherent risk and so it is not possible for a legitimate company to guarantee returns

•    You are contacted out the blue about an investment opportunity, via a cold-call, an e-mail or an approach on social media

•    You are put under pressure to invest quickly or to commit to an investment on the spot.

How to prevent a cryptoscam

•    If you are considering any investment, take time to do your research on the product and the company

• An online search on Companies House will confirm if the company is registered as a UK company
• Find out if there are any concerns posted by victims, by searching online for the company name, directors’ names and the product 

•    Seek advice from independent professional advice services before making a significant financial decision to help prevent you being scammed. Even genuine investments can be high risk. You can find a financial advisor accredited by the FCA on their register here.  

•    A company must be authorised by the FCA to advertise or sell crypto products in the UK – check the Register to make sure the firm is authorised.

•    Only use the telephone number and email address on the FCA Register, not any other details that you may be provided with

•    Products or investment opportunities found through search engines are not necessarily authorised or regulated by the FCA. Check the FCA warning list for firms to avoid.

How to report a cryptocurrency scam

•    Report the scam to FCA:

• Call their Consumer Helpline on 0800 111 6768
• Use their online form. 

•    Report the scam to Action Fraud, the reporting centre for fraud and cyber-crime in England, Wales and Northern Ireland:

• Call 0300 123 2040 Monday to Friday 8am - 8pm
• Use the Action Fraud online reporting tool 

•    Inform your bank immediately. If your account is with us: 

• Call us on 0800 4086 407
• Email us at webfraud@alrayanbank.co.uk

•    Contact the Police on 101

*The FCA do regulate certain cryptoasset. You can find out more information here.