TLDR; Evertas has seen an alarming anecdotal uptick in requests for help from people who have been scammed out of anywhere from a few thousand dollars to over six figures – here are some thoughts to keep your employees, friends and family safe from predatory crypto scams.
According to CipherTrace, in the first five months of 2020, crypto thefts, hacks, and frauds totaled $1.36 billion, with fraud and misappropriation accounting for 98% of the total value—nearly $1.3 billion.
While exchange hacks, exit scams, and fraudulent ICOs garner the most attention, there’s a very real, and likely underrepresented, human cost to individual losses due to social media-driven crypto “investment” or FOREX or binary options “trading” offers on the internet.
Scammers, often using relatively sophisticated social engineering, prey on people under financial stress who can least tolerate what the UK’s Financial Conduct Authority (FCA) estimated was an average of US $19,000 loss per victim.
Crypto Trading and Investments Gone Wrong
Evertas has seen an alarming anecdotal uptick in requests for help from people who have been scammed out of anywhere from a few thousand dollars to over six figures – while six figures does not sound like much in an enterprise context, these are individual losses to enterprise employees, health care workers, retirees, and small business owners; maybe even your own family.
What to Look out for when Investing in Crypto
If you or someone you know is tempted by amazing returns with little risk on investing in cryptoassets, here are some things to consider before having anyone make that leap into crypto and risk losing their life’s savings.
Please note that this is not meant to be a technical article or exhaustive in nature and no legal or financial advice is being provided.
Pay careful attention to the Pitch – cliché but true: if it sounds too good to be true, it is.
Facebook and Instagram are incredibly popular avenues for soliciting new victims of crypto fraud.
While investment firms may have a social media presence, most do not approach potential clients through social media. Fake user accounts proliferate on both platforms; for example, victims may get a new follower on IG whose profile is set to private and no real summary is provided except for a description of “successful day trader” or “professional bitcoin investor” or something similar. Or, if the account is public, there may be a handful – in some cases, dozens – of photographs of stacks of dollars or euros; pictures of expensive cars; and screen grabs of customer “testimonials” of success in making huge sums of money. They may approach victims directly offering training package on crypto trading before quickly shifting to managing “complicated” trades on the victim’s behalf.
High Success Rates in Crypto Trades
People claiming 98% “success rates” or even 75% “success” in their crypto asset trades are lying. Scammers make these claims as an implied guarantee of whatever returns are being advertised. These investment returns may be advertised as “invest US $500 and receive US $7,500 in seven days” or something similar. Of course, the more the victim invests, the greater the “return.” Scammers will also make claims as to the “safety” of investing in crypto, however, cryptoassets such as Bitcoin (BTC) are extremely volatile and are not backed by fiat currency (the exception being stablecoins such as Tether). Additionally, victims rarely realize that cryptoassets behave like cash and that once sent, the transaction cannot be reversed. Commercial crypto recovery is still in its infancy and the odds of a victim successfully recovering “invested” funds are low.
Those Advertising as “Professional Traders”
In most countries, financial advisors and investment firms are regulated. If you are in the US, people advertising as “professional” traders or “account managers” or “brokers” are likely violating securities laws as they are generally not licensed to provide the investment or trading advice or services they are pitching. Broker-dealer organizations are tightly regulated in the US and may be subject to oversight by a variety of different organizations, including the Securities and Exchange Commission (SEC); Financial Regulatory Authority (FINRA); Commodity Futures Trading Commission (CFTC); and the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Claims that cryptocurrencies are “too new,” “poorly understood,” or “not regulated” should be examined carefully.