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Cryptocurrency Investment Scams

Investing in cryptocurrency is extremely tempting. It’s new, exciting, trendy, and you’ve probably been bombarded online and on social media about stories of someone getting rich from cryptocurrency or you’ve seen ads on how to invest in them yourself. But you also probably have heard stories of how someone was scammed and sent a fraudster Bitcoin, or you probably had a scammer try to get you to send Bitcoin to them.

Although it is reported that most bitcoin transactions (98.9%) are not associated to criminal activity, the birth of cryptocurrency has provided individuals with new mediums to facilitate criminal activity. Lately, scammers are using the cryptocurrency investment trend to make their money.

Stats

  • In 2021, investment frauds only accounted for 7% of identified cryptocurrency crime in Edmonton.
  • EPS’ Cyber Crimes Unit identified 87 cryptocurrency investment complaints with an approximate combined monetary loss of $5.29 million*.
  • Bitcoin was the primary cryptocurrency, with Ethereum ranked second.
  • In 2019, only four such occurrences with an approximate monetary loss of $84,000 were reported to EPS
  • In 2020, 21 reports with an approximate monetary loss of $272,000 were received.

*Note: monetary losses are approximate. Some reports did not specify the currency, so they were assumed to be in CAD; USD losses were converted to CAD.

How does the scam work?

  • Complainants are introduced to cryptocurrency-related investments via social media, phone calls, online advertisements, and online dating platforms.
  • Complainants are sometimes directed to legitimate third-party cryptocurrency services where government currency would be converted into cryptocurrency – which is subsequently sent to the suspect’s cryptocurrency address.
  • In some occurrences, personal information (name, address, credit card information, government identity documents, etc.) about the complainant were collected by the suspect.
  • Complainants are occasionally also directed to install Remote Desktop Protocol (RDP) software, which allows suspects to access the complainants’ devices remotely.
  • In some investigations, it was revealed that complainants were sometimes directed to install mobile applications – which could be moderately intrusive on the complainant’s device.
  • It is also extremely common for suspects to use web domains, for the purpose of setting up websites and emails.
  • The most common theme comprised of complainants being unable to withdraw their invested funds. When complainants request for their investments to be withdrawn, suspects typically ask for more payment or cannot be contacted.

Why does it work?

The fear of missing out, being bombarded with hype on social media platforms, and the enticing promises of guaranteed quick wins make it difficult to say no when someone who claims to be a subject matter expert walks into your online life.

Can you get my money back?

Cryptocurrency is a mainly unregulated marketplace, not backed by central banks. Once the transaction is completed, it is unlikely to be reversed. So be very careful when sending cryptocurrency, especially to unfamiliar individuals or businesses.

Reduce your investment risk

Since cryptocurrency transactions cannot be refunded, the best way to keep your money safe is to understand the risks well before you invest or send anyone cryptocurrency. As a police service, we are not here to provide investment tips, but we can provide you with knowledge and resources to make a more informed decision so you can find a trustworthy investment source. This information is from our Cyber Crimes Unit and the Alberta Securities Commission

If you are truly interested in cryptocurrency investments, take the time to research everything!  Truly understand the kind of cryptocurrency you are looking to invest in, how you will invest in it, and the risks associated with it. Is the asset legitimate or is it just being hyped on social media? What are the policies for selling – do you have to wait years before selling or can you sell at any time? Where will your virtual assets be “held” - a trading platform or a wallet - and is it legitimate? For example, wallets have two options: “hot” and “cold” wallets. Hot wallets run on connected devices for convenience but has a higher risk of hacking and theft. Cold wallets are not connected to the internet (like a USB drive), so it’s not convenient, but there’s less chance for hacking and theft.

Crypto asset trading platforms can provide some security if they are registered as a Money Service Business (MSB). By registering as a MSB, they are subjected to Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA). Using a service that is registered as a MSB in Canada can reduce (but not eliminate) your risk of being frauded. There are other factors that one should consider when determining if a service is legitimate, such as the technical details. Some websites will impersonate legitimate businesses, so verifying if a domain name actually belongs to a registered company is important as well.

Crypto trading platforms can also be registered with the Alberta Securities Commission, which affords the following protection for consumers:

  • Secure handling of client funds
  • Safekeeping of assets
  • Protection of personal information
  • Pre-trade disclosures
  • Proactive measures against market manipulations and/or unfair trading.

Getting investment advice online?

Like any suspicious offer, take the time to step away and really consider what is being offered.

  • Learn about the cryptocurrency you want to invest in and truly understand it. Some may have suspicious rules like not being allowed to sell for two years (you should be allowed to buy and sell at any time).
  • Like anything, consider the source of this advice. Can I trust this stranger I’ve never met in person with my personal information and large sums of money just because they’re saying what I want to hear? If I told someone I know and trust about this offer, would they believe it’s legitimate?
  • Don’t fall for the hype! Typically, online/social media advice is speculative and misrepresents the investment returns. No one can guarantee a quick, high return on cryptocurrency with little to no risk. There have been instances where the creators of a cryptocurrency generated so much hype to drive up the value until the creators sold all their shares and essentially made the cryptocurrency worthless.
  • Don’t click the bait! Just because you found an ad on social media does not mean they’re legitimate. Anyone can buy social media ads.
  • Ignore unsolicited investment opportunities offered by strangers through dating apps and social media. If a stranger is coming to you with an opportunity, they are likely not legit.
  • Never give remote access to your computer and do not download a mobile app that a stranger has directed you to do.
  • Do not give your personal information (name, address, credit card information, government identity documents, etc.) to strangers.
  • If they ask for a wire transfer or for your crypto assets to be sent to another platform or an unknown account, it’s likely a scam.

Bottom line: If you don’t understand it, don’t invest in it.