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Cryptocurrency scams: what to look out for

Cryptocurrency scams: what to look out for
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Cryptocurrency-related scams are becoming more and more common. According to data from Action Fraud, investors lost £113 million to crypto scams in 2020. This is a year-on-year increase of 57% across the entire UK. 

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Metro Bank points out that because there’s no centralised authority to regulate the crypto market, consumers don’t have a lot of guidance when it comes to investing. In addition, cryptocurrencies can fluctuate in price dramatically within days, which makes it easier for scammers to trick people into investing.

When researching investments and potential scams, keep in mind that investing in cryptocurrency is extremely high risk and complex. The Motley Fool has provided this article for the sole purpose of education and not to help you decide whether or not to invest in cryptocurrency. Should you decide to invest in cryptocurrency or in any other investment, you should always obtain appropriate financial advice and only invest what you can afford to lose.

Types of cryptocurrency scams

Crypto scams can take many forms, sometimes similar to other investment scams.

Adam Speakman, head of fraud and investigations at Metro Bank, explains: “If consumers follow our simple steps and make the appropriate checks before investing – like they should with any other investment opportunity –  they can reduce the fraud risk.” 

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The first step to getting this done is to watch out for obvious signs of a crypto scam, such as:

  • Offers to invest in a new cryptocurrency (that doesn’t actually exist) before it hits the market. This is usually offered as an Initial Coin Offering (ICO), a real offer to buy tokens before new crypto launches – but the crypto being offered will never launch
  • A chance to help you invest in crypto ‘at the best time’ or ‘for the best profits’
  • A push to get you to join an investment platform that will then steal your data
  • A dangerous website link that actually installs malware on your phone or computer
  • A crypto wallet that can also be accessed by support or advisors ‘for your convenience’. This makes it easy for fraudsters to access your information. 

How to protect yourself  

“Fraud related to cryptocurrency is so prevalent. A number of British banks are preventing their customers from transferring funds to crypto trading platforms,” explains Speakman.

If you want to invest in crypto, there are ways to protect yourself against scams. Metro Bank recommends always being wary if you’re contacted out of the blue with an ‘amazing opportunity’ that seems too good to be true. This is especially true if the contact is via social media, an increasingly popular medium for crypto scams.

In the UK, any firm offering financial services must be registered with Financial Conduct Authority (FCA). Check whether the company you’re talking to is FCA registered. If they’re not, you should be suspicious.

Finally, you should always be aware of anything that sounds too good to be true. Returns are never guaranteed when investing, and this is especially true with cryptocurrencies. If somebody is pushing you to ‘act now to make money in days’, it’s best to walk away. 

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