New Action Fraud Data Prompts FCA in the UK to Warn Investors About Crypto Scams
One of the less pleasant parts of cryptocurrency is the rampant scams that are common in the industry. This is true of any emerging industry but The Financial Conduct Authority (FCA) of the UK has issued a warning to investors against dialing for crypto-related scams.
This comes after it was revealed that investors lost a whopping £195 million to cams last year. On average, each investor lost £29,000 and besides cryptocurrency, other popular scam methods include forex and bonds.
This information was made available by Action Fraud and according to them, the scammers are becoming rather creative in their methods. For example, the use of social media for contacting potential victims increased significantly.
“Last year 54% of those who did the right thing by checking the FCA Warning List had been contacted by potential fraudsters via online sources, up from 45% in 2017,” said the report.
Investors have been advised to conduct research on any firm they are contacted by before they send any funds and report any suspicious activity to the FCA.
The first quarter of the year is a particularly vulnerable time as people are more willing to invest towards the end of the tax year and thus, need to be at alert.
How to Detect a Scam
There was a six-point guide compiled by the FCA to educate people on how to spot scams. Signs include unexpected contact from unknown entities, and time pressure, which usually involves trying to pressure the victim by claiming that they must make a decision within a certain time frame else the deal will be gone.
Social proof was also listed as well as unrealistic claims of ridiculous returns on relatively small investments. Other signs to look or for include false Authority and flattery.
One of the warning signs that greatly applies to the cryptocurrency industry is the unrealistic claims of huge returns. This can be chalked down to lack of knowledge around the industry. One of the first events that brought crypto to the mainstream was when the price of Bitcoin exploded and some of its earliest investors became millionaires overnight.
Obviously, the market has stabilized since then and most investors aren’t making millions overnight. To a novice, however, the thought of crypto has been associated with ‘magical internet money that creates millionaires’ and so, they will want to believe wild claims.
Fortunately, the public is becoming more sensitized and less likely to fall for scams.