In simply the primary half of 2024, funding scams conned Canadians out of almost $107 million—virtually half of that ($51.6 million) by way of cryptocurrency scams, in response to the Canadian Anti-Fraud Centre (CAFC). Crypto investments are the highest sort of funding scams reported to CAFC, says Nancy Cahill, appearing consumer and communications outreach officer. Fewer than 5% of scams are reported, so the precise numbers are seemingly a lot greater.
Scammers typically discover victims on social media
Cryptocurrency scams are sometimes intertwined with different sorts of scams—and the criminals behind them forged a large internet. Con artists continuously discover potential marks on social media. In response to an evaluation by TradingPlatforms primarily based on FTC information, almost one-third of social media crypto fraud occurs on Instagram, and one-quarter on Fb. Some ruses begin out as romance scams. As soon as suspects achieve a sufferer’s belief and affection, they current an “funding alternative” or request crypto or cash to pay for a made-up expense, reminiscent of medical payments.
10 sorts of crypto scams
There are numerous sorts of scams to be careful for, and sadly, as buyers get savvier, the cons evolve and turn out to be trickier to identify. To guard your self, all the time know the place your cash goes, perceive the crypto promoting guidelines in Canada, and solely use trusted and compliant crypto buying and selling service suppliers. (As a place to begin, see MoneySense’s picks for the high crypto platforms in Canada, all of which securities regulators have permitted to do enterprise on this nation.) An exhaustive checklist of crypto scams is probably going inconceivable, however to guard your self, listed here are 10 to be careful for.
1. Pump-and-dump, or rug pull
In a “pump and dump” or “rug pull” scheme, promoters of a cryptocurrency hype it as much as enhance demand, and when the value soars, they promote all their cash for a fast revenue. As a result of they promote in giant volumes, different buyers get nervous and promote their cash, too. As panic units in and the promoting spreads, the coin’s worth plunges. The promoters get wealthy and small buyers are left “holding the bag,” confronted with big losses.
A infamous instance of an alleged crypto pump-and-dump scheme is a coin referred to as Squid Sport. Launched in October 2021, it rode the recognition of the Netflix sequence of the identical identify—regardless of having no affiliation. Lower than two weeks later, Squid Sport’s crypto builders all of the sudden offered their holdings when the coin’s worth hit $2,800, making themselves $3.3 million richer (all figures in U.S. forex). Right now, one Squid coin is price a few tenth of a penny.
The pump-and-dump rip-off shouldn’t be distinctive to crypto, in fact. It’s what high-flying stockbroker Jordan Belfort—the topic of the Hollywood movie The Wolf of Wall Avenue, starring Leonardo DiCaprio—engaged in throughout the Nineties. His agency was accused of artificially inflating the value of penny shares earlier than promoting their shares to make plenty of quick cash—costing buyers as much as $200 million. Within the early 2000s, Belfort served 22 months in federal jail for securities fraud. He’s now advertising and marketing himself as an funding guru.
2. Giveaway rip-off, or 2-for-1 rip-off
In a giveaway rip-off, somebody asks you to ship cryptocurrency to their pockets deal with, with the promise of sending you double the quantity. “Ship me 1 token, I’ll ship you 2 in return” is a typical overture.
Such a rip-off is very efficient throughout crypto bull markets when buyers could also be experiencing FOMO and the prospect of free crypto could appear too tempting to go up.