Victims lose £27 million to cryptocurrency investment scams
Cryptocurrency and foreign exchange investment scams saw victims in the UK lose some £27 million in the last financial year, new figures show. According to the UK's national centre for reporting cyber-crime, scams tripled in number from the previous period, suggesting the public is becoming increasingly susceptible to promises of getting rich quick via crypto-investment.
The ICO market has drawn enthusiasm and stark warnings in equal measures since its rise to prominence. While the cryptocurrency scene has boomed, the success of the up-and-coming fundraising technique has seen a horde of inexperienced investors flood the market. These investors are primarily fuelled by the infamous condition of FOMO (or “fear of missing out”), making for impulsive collective investments which are easily manipulated by cyber-criminals.
Notably this was illustrated in brutal detail by a former McKinsey & Company consultant, who weaponised an internet prank to purportedly raise awareness among gullible investors. An apparent Initial Coin Offering ‘scam’ saw Dr. Yassin Hankir allegedly make off with millions in investors’ funds with his company Savedroid. While Hankir stated he had investors best interests at heart by raising awareness of online crimes, his stunt struck a nerve with a number of ICO investors, and enraged thousands of people worldwide.
Despite high-profile examples like this, however, cryptocurrency investment scams remain an incredibly lucrative market for digital con-artists. Suggesting there may be some truth to the adage that a fool and his money are soon parted, victims of cryptocurrency cons lost an average of £14,600 in each case in 2018, according to a new report from Action Fraud and the Financial Conduct Authority (FCA). The news of individuals making their fortune via the likes of Bitcoin seems to have added to the allure of "get rich quick" bogus online trading platforms.
Action Fraud director Pauline Smith commented, "These figures are startling and provide a stark warning that people need to be wary of fake investments on online trading platforms."
According to data from Action Fraud, the UK's national centre for reporting cyber-crime, reports of the scams increased more than threefold over the last 12 months. In 2018/19, 1,834 cases were recorded, compared to just 530 the year before. The figures show that fraudsters were most successful at luring victims by promising high returns from investments in cryptocurrency – of which Bitcoin and Litecoin are among the most well-known – as well as the more traditional promise of foreign currency trading scams.
In a statement accompanying the release, the FCA said, "Investors will often be led to believe that their first investment has successfully made a profit… The fraudster will then contact the victim to invest more money or introduce friends and family with the false promise of greater profits. However, eventually the returns stop, the customer account is closed and the scammer disappears with no further contact."
Following the news, the City regulator, is launching an advertising campaign to raise awareness of the scams. It also said that fake celebrity endorsements and images of luxury items such as expensive watches and cars were often used to lead consumers to professional-looking websites where they are persuaded to invest, warning them to be particularly wary of such promises.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said, "Scammers can be very convincing, so always do your own research into any firm you are considering investing with to make sure that they are the real deal."
