In simply the primary half of this yr, funding scams conned Canadians out of $161 million—most of it misplaced to cryptocurrency scams, in accordance with the Canadian Anti-Fraud Centre (CAFC). “Crypto investments are the highest kind of funding scams reported to CAFC,” says Jeff Horncastle, the group’s performing consumer and communications outreach officer. He provides that fewer than 5% of scams are reported, so the precise numbers are possible a lot larger.
Scammers typically discover victims on social media
Cryptocurrency scams are sometimes intertwined with other types of scams—and the criminals behind them forged a large web. “Sadly, everyone seems to be focused,” Horncastle says.
Con artists continuously discover potential marks on social media. In keeping with an analysis by TradingPlatforms based mostly on FTC knowledge, practically one-third of social media crypto fraud occurs on Instagram, and one-quarter on Fb.
“In some instances, the rip-off begins as a romance rip-off and rapidly turns into an ‘funding alternative,’” says Horncastle. “As a result of suspects have gained the sufferer’s belief, it will possibly result in a high-dollar loss for the sufferer.”
10 sorts of crypto scams
There are various sorts of scams to be careful for, and sadly, as traders get savvier, the cons evolve and turn into trickier to identify. To guard your self, at all times know the place your cash goes, perceive the crypto advertising rules 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 top crypto platforms in Canada, that are all registered with Canadian securities regulators.) An exhaustive listing of crypto scams is probably going unattainable, 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 increase demand, and when the worth soars, they promote all their cash for a fast revenue. As a result of they promote in massive volumes, different traders 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 traders are left “holding the bag,” confronted with enormous losses.
A infamous instance of an alleged crypto pump-and-dump scheme is a coin referred to as Squid Game. Launched in October 2021, it rode the recognition of the Netflix sequence of the identical title—regardless of having no affiliation. Lower than two weeks later, Squid Recreation’s crypto builders immediately offered their holdings when the coin’s worth hit $2,800, making themselves $3.3 million richer (all figures in U.S. forex). At the moment, one Squid coin is value about a tenth of a penny.
The pump-and-dump rip-off just isn’t distinctive to crypto, after all. It’s what high-flying stockbroker Jordan Belfort—the topic of the Hollywood movie The Wolf of Wall Road, starring Leonardo DiCaprio—engaged in through the Nineteen Nineties. His agency was accused of artificially inflating the worth of penny shares earlier than promoting their shares to make plenty of quick cash—costing traders 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 investment guru.
