In the primary half of 2024 alone, Canadians were defrauded of nearly $107 million by investment fraudsters – almost half of that ($51.6 million) through cryptocurrency fraud, in line with the Canadian Fraud Prevention Centre (CAFC). Crypto investments are essentially the most common sort of investment scam reported to CAFC, says Nancy Cahill, deputy chief client and communications officer. Less than 5% of scams are reported, so the actual numbers are likely much higher.
Fraudsters often find victims on social media
Cryptocurrency fraud is usually related to other sorts of fraud– and the criminals behind it forged a large net. Fraudsters often find potential victims on social media. According to a Analysis by TradingPlatforms According to FTC data, nearly a 3rd of crypto scams on social media happen on Instagram and 1 / 4 on Facebook. Some tricks start as Love scamOnce suspects have gained a victim’s trust and affection, they present them with an “investment opportunity” or demand cryptocurrency or money to pay fictitious expenses similar to medical bills.
10 Types of Crypto Scams
There are many sorts of scams to look at out for, and unfortunately, as investors turn out to be more savvy, scams are evolving and becoming tougher to identify. To protect yourself, at all times know where your money goes, understand crypto promotion rules in Canada, and only use trusted and compliant crypto trading service providers. (As a start line, try MoneyDown’s pick of one of the best crypto platforms in Canada, all of that are approved by securities regulators to do business on this country.) An entire list of crypto scams might be unimaginable, but to guard yourself, listed here are 10 to look at out for.
1. Pump and Dump or Rug Pull
In a pump and dump or rug pull scheme, the originators of a cryptocurrency drive up demand for it, and when the worth skyrockets, they sell all their coins to make a fast profit. Because they’re selling in large quantities, other investors get nervous and sell their coins too. When panic sets in and selling spreads, the worth of the coin plummets. The originators get wealthy, and small investors are left with huge losses.
A notorious example of an alleged crypto pump-and-dump scheme is a coin called Squid Game. It was launched in October 2021, capitalizing on the recognition of the Netflix series of the identical name – even though it had no connection to it. Less than two weeks later, Squid Game crypto developers suddenly sold their shares when the coin’s price hit $2,800, making themselves $3.3 million richer (all figures in US currency). Today, one Squid coin is value $100,000. a few tenth of a penny.
The pump-and-dump scam isn’t limited to cryptocurrencies, in fact. In the Nineteen Nineties, successful stockbroker Jordan Belfort – the topic of the Hollywood film starring Leonardo DiCaprio – also engaged in it. His firm was accused of artificially inflating the worth of penny stocks before selling their shares to make loads of money quickly – costing investors as much as $200 million. In the early 2000s, Belfort served 22 months in federal prison for securities fraud. Now he markets himself as Investment Guru.
2. Giveaway scam or 2-for-1 scam
In a giveaway scam, someone asks you to send cryptocurrency to their wallet address and guarantees to send you double the quantity. “Send me 1 token, I’ll send you 2 back” is a typical overture.
This sort of scam is especially effective during cryptocurrency bull markets, when investors may experience “FOMO” (fear of wasting money) and the prospect of free cryptocurrency seems too tempting to pass up.
