Over the last year, people have reported using their life savings on cryptocurrencies as they hope to corner tokens that could net them millions. According to Action Fraud, a cybercrime and fraud reporting centre, cryptocurrency scammers have stolen a collective £146,222,332 from their victims this year. Per victim, those losses level out at £20,500, and experts with Kraken, a US-based cryptocurrency exchange, have identified “broker” scams as the most common fraudsters use to target would-be investors.
How to identify a cryptocurrency broker scam
Broker scams, otherwise known as a “fake investment scam” by Curtis Ting, Kraken’s Managing Director of Europe, will see fraudulent crypto brokers approach interested parties.
He explained these scammers tend to target those who have expressed an interest in investing via social media with offers of “very high returns on their investments”.
Mr Ting said the “broker” would then get the victim to “set up an exchange account to convert fiat currency into cryptocurrency” before withdrawing funds into their own wallet and disappearing.
These traders may sometimes style themselves as an “investment advisor” and ride on this faked credibility.
Their scams are among the toughest to crack down on, as “a new one seems to pop up” with each one shut down.
Investors can stay safe online by appropriately educating themselves, and Kraken recommends people keep their eyes peeled for “too-good-to-be-true” promotions.
Advice from the company adds these promotions will often promise people can “get rich quick”.
Kraken also provided a checklist people should go through when looking at a prospective broker.
The items on that list include:
- Stick with well-known and popular exchanges
- Use Trustpilot and other resources online to read reviews
- Put the company’s name and “scam” into Google to find results regarding the company’s legitimacy
- Look out for complaints about not being able to withdraw funds
- Determine where the company is registered and if there are any reliable reviews confirming it’s the real address of the company
- Get information about fees and rates upfront and in writing
- Don’t feel pressured to transfer your crypto to the exchange
- Be extra cautious with people claiming to be “Blockchain Recovery Experts” who claim they can retrieve your stolen funds
These could help people get back their lost money and shut down fraudulent companies.
The FCA recommends people check with them before they consider adding a currency to their portfolio.
The firm has a warning list people can use to identify potential scams.
Their database holds companies that have previously scammed both investors and pension scheme members.