UHY Ross Brooke Chartered Accountants

Crypto currency – A scammers dream?

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The use of crypto currency is becoming increasingly common, whether it be for payment of goods or services or for investment purposes.

In the last year Bitcoin has appreciated by 500% and potential investors are naturally drawn to these eye catching returns without necessarily understanding the blockchain that underlies the investment.

As anonymity underlies much of the blockchain, it’s not unsurprising that fraudsters have been quick to get in on the action and take advantage of investors’ naivety and fear of missing out on the next big gold rush.

One Coin was a prime example of a Ponzi scheme which was not only, not a crypto currency, but was not even on the blockchain. Nevertheless, the scheme reportedly raised a staggering $4 Billion from unwitting investors, many of whom were individuals that invested their life savings in the scheme. If you have not already heard it, may I recommend the excellent nine-part BBC podcast called The Missing Cryptoqueen.

Action Fraud (The National Fraud and Cyber Crime Reporting Centre) recently reported that £145 Million had been lost to cryptocurrency fraud in the first 9 months of the year. Many of the investment opportunities being marketed in crypto currency are entirely unregulated and consequently there is no right of recourse to the FCA for mis-leading claims or product mis-selling.

In order to lure investors scammers will often use fake testimonials on social media from celebrities who appear to endorse the investment opportunities. The fake advertorials are designed to look like genuine websites e.g. the BBC and have included well known faces such as Lord Sugar, Peter Jones and Deborah Meaden all of whom are recognised for their financial acumen.

Action Fraud warn us to be wary of online adverts promising high returns on investments in crypto assets or crypto-asset related products and of cold calls, emails or approaches on social media. They also advise that before investing we should seek advice from a financial advisor accredited by the FCA and only use the contact details on the FCA web site to contact the financial advisor.

Blockchain and crypto currency open up a whole new world of possibilities for positive change but as its use becomes more prevalent it’s increasingly important that we protect ourselves against those that would seek to use it for their own nefarious purposes.

You may also be interested in:

What you need to know about crypto assets and UK tax

Action Fraud

The Missing Cryptoqueen

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