Cryptocurrency Investment Scams - Cyber and Fraud Centre

In recent years, cryptocurrency has seen a massive rise in attention and interest and, for the majority, acts as a legitimate method of payment or investment. Many large shopping platforms have started taking cryptocurrency as a payment method. Some large financial services providers, such as PayPal and Revolut allow UK customers to buy, sell, and hold cryptocurrency with their accounts.

Unfortunately, the rise in crypto’s popularity has been matched with an increase in cryptocurrency investment scams. Banking organisation Santander reports that there has been a 61% increase in the number of reported cases since the end of 2021, with the average scam in 2022 being worth over £11,000.

What are Cryptocurrency Investment Scams?

Cryptocurrency is a digital asset that can be traded online and is unregulated by the UK government. This means that there are no restrictions on how high (or low!) cryptocurrency exchange rates can fluctuate, and it also means that there are no protections from financial organisations if something goes wrong. The Financial Services Compensation Scheme has warned that if a platform that exchanges or holds cryptocurrency goes out of business, it cannot protect investors from losses.

Scammers take advantage of the unregulated nature of cryptocurrency by creating investment scams. These scams work by creating fake cryptocurrencies or investment opportunities that often have a too-good-to-be-true return for the money invested.

Crypto scammers have been known to create their own websites with fake celebrities or political endorsements, advertise their get-rich-quick crypto schemes on social media, and even attempt to coerce dating app victims into investing.

The fake sites in cryptocurrency scams often use multiple logos of trusted organisations to make their business seem more legitimate, as if endorsed or protected by these services.

*An example scam cryptocurrency investment website. Source:* *https://news.bitcoin.com/the-tell-tale-signs-of-a-scam-crypto-website/*

Scam websites also promise high return rates for investors or an easy way to make money on the side. Some sites will also have fake comment sections or reviews with overwhelmingly positive messages on how easy it was to make money.
Scams often use fake celebrity endorsements to gain the trust of potential victims by making it look like these celebrities or politicians have been buying the advertised cryptocurrency. These faked endorsements can not only be found on the host site but also through phishing emails and advertisements. They will sometimes be made to look like legitimate articles from popular news sites, such as the BBC or The Mirror.

*Some cryptocurrency investment scams faking endorsements from well-known figures. Source:* *https://www.hackread.com/fake-celebrity-endorsements-bitcoin-scam/*

*Advertisements may also use political figures or financial advisors alongside catchy headlines to lure victims in. Source:* *https://www.occrp.org/en/fraud-factory/down-the-bitcoin-funnel-the-tech-firms-driving-investors-to-ruin-with-fake-celebrity-news*

Importantly, these investment scam ads aren’t only restricted to showing up on suspicious websites or through phishing emails – researchers at Check Point Research found them using Google ad campaigns to appear as the top result of searches for popular crypto wallets, while Facebook was sued in March 2022 by the Australian Competition and Consumer Commission for running cryptocurrency investment scams ads that used photos and quotes seemingly from celebrities endorsing the fake schemes.

*Some scams have been seen using Google ad campaigns to come up as the first result on searches for popular cryptocurrency wallets. Source:* *https://research.checkpoint.com/2021/cpr-alerts-crypto-wallet-users-of-massive-search-engine-phishing-campaign-that-has-resulted-in-at-least-half-a-million-dollars-being-stolen/*

The fraudulent sites mimicking legitimate organisations will often look very similar, if not exactly alike, to the web pages of the original organisation. Sometimes the only difference will be the domain name, but even that will be displayed in a way to look like that of the legitimate site, with just a slight change in spelling that you could easily miss.

*Researchers at Check Point Research highlighted how a fraudulent cryptocurrency wallet site was found to be mimicking the design style of a legitimate site. Source:* *https://blog.checkpoint.com/2021/11/04/scammers-used-google-ads-to-steal-500k-worth-of-cryptocurrency/*

Investing in cryptocurrency can often involve large amounts of money, and many people who have fallen victim to these scams have lost huge sums, with the BBC reporting that some people have lost their entire life savings to cryptocurrency scammers.

How to Protect Yourself from Cryptocurrency Scams

Knowing how to spot a cryptocurrency investment scam can help protect you from falling victim.

Only scammers will guarantee fast profits and high return rates. The unregulated cryptocurrency market means that the value of a coin can highly fluctuate, much more than any traditional currency. No legitimate cryptocurrency-related product will guarantee that you will make a profit from the investment. It is probably a scam if it sounds too good to be true.
It is easy to fake a brand or celebrity endorsement. Brand logos and celebrity photos can easily be found online and used on any site. Quotes can easily be made up, and fraudsters will use them to make their scams seem legitimate. If in doubt, search the brand or celebrity’s name alongside the cryptocurrency you are looking to invest in to see if the endorsement claims are legitimate.
Celebrities, politicians, and so-called “investment managers” will never contact you out of the blue to discuss cryptocurrency. Especially on social media, telephone calls, text messages, and even dating apps! If anyone is contacting you out of nowhere about cryptocurrency, it’s a scam!

If you are considering investing in cryptocurrency, here are a few ways to ensure you are investing in a legitimate service and to keep your money protected:

Do your research on different crypto coins, tokens and wallets. The cryptocurrency world is very different from typical currency, and crypto coins work differently from regular pounds or dollars. Knowing how the technology behind cryptocurrency works can help inform you on what to invest in. If it is unclear how a particular cryptocurrency works, it is best to pause any investment and do more research – you may discover that the currency is fraudulent.
Only invest small amounts into new wallets. The first time you buy a new cryptocurrency, sending a small amount of money can help you determine the legitimacy of the currency or wallet.
Protect your crypto wallet. Investing in cryptocurrency involves using a digital wallet with private keys. Suppose a potential investment opportunity asks you to share your private keys or any other passwords relating to your crypto wallet. In that case, the opportunity is likely a scam. Never share your wallet’s private keys, seed phrases, or any other passwords relating to your crypto wallet with anyone.
Don’t rush! Talk the investment through with family, friends, or financial advisors. Investing in new technology can be exciting, and investing large amounts at once is often tempting. However, scammers take advantage of this and push new investors to keep giving more money to the scammer’s cryptocurrency scheme. If you are considering investing, take the time to talk to others about what you are interested in putting money towards.
Increasing Exit Fees. If you have been unfortunate to have been the victim of a scam, be aware that the criminals will often offer to return your investment but to release your funds, you need to provide an exit fee. These fees are often substantial and are just part of the scam. They usually give you a short period of time to provide the funds, and after this time, the money required for release goes up. Do not make any additional payments for the release of money; you won’t receive any money back in return.
Legitimate cryptocurrencies have a well-written whitepaper. All legitimate cryptocurrencies have a whitepaper – a document detailing the currency’s technical, financial, and commercial information. These can be found through a simple Google search or the Whitepaper Database. If you cannot find the whitepaper for a currency, or it does not seem as well written and detailed as other legitimate currencies, it may be a scam, and you should not invest in it.
Check that the investment site or firm you are investing with is legitimate. This can be done by seeing if the business is on the Financial Conduct Authority’s (FCA) Financial Services register. In the UK, the FCA must authorise nearly all financial services. The FCA also regularly updates a list of unauthorised firms, including those involved in fraudulent activities. On top of that, the FCA provides a Scam Smart service, which can help you quickly identify if the cryptocurrency you are investing in is legitimate.
Never invest more than you are willing to lose. Cryptocurrency isn’t regulated, meaning it can decrease in value as quickly as it can increase. Financial firms can’t help you if your investment fails to profit or if a currency you have invested in stops trading, is hacked, or is fraudulent.