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Crypto scams – what should you look out for?


Over the course of the last 18 months, the world of cryptocurrency has received a lot of attention, from both mainstream media and some of the most high-profile business names across the globe.  

There has been a downside to this - the considerable amount of public attention received by crypto has also created a significant spike in fraud, as criminals sought to exploit the trend.  

If you are thinking of investing in cryptocurrency, there are a few things to look out for in order to make sure you are protecting yourself from falling prey to fraud.

1. Never let anyone trade on your behalf

The number one rule of thumb when investing in cryptocurrency is to ensure that you use a recognised trading platform, and that you never give anyone access to your crypto wallet. The only person who should be trading is you - and you should be the only one that has access to your secure log-in information.   

If a firm or individual approaches you and requires access to your wallet in order to trade for you, it is almost certainly a scam. Remember that if a third party has access to your crypto wallet, they have access to your money.

2. Avoid cold calls or unexpected emails

Like other types of scams, many fraudsters will get in touch with potential victims 'out of the blue', either by phone or by email. If you receive a call you don't expect about investing in crypto, it is very likely to be a scam.

Fraudsters are also increasingly using phishing emails in order to entice investors, often with the promise of returns and immediate profits.

Criminals also know that the most convincing phishing emails are those that mimic a genuine organisation, so it's important to ignore an unexpected email even if you recognise the source.

It's very rare for any financial provider to get in touch out of the blue offering investment services - so even if you have dealings with the business, act with caution and call them on a recognised number to check.

3. Be wary of 'crypto millionaire' influencers and social media adverts  

Social media platforms are awash with influencers showing off affluent lifestyles - which they tell their followers are a result of crypto monetary gains. Some fraudsters also use celebrity endorsements to promote their investment techniques and target users through paid social media ads.  

Fraudsters have been known to utilise social media platforms and ads to direct victims towards fake investment sites. They will encourage investors to send money to the fake platforms, before manipulating them to make it look like the fraud victim is making a profit. This is to encourage them to transfer additional funds.  

Once this has been done, the account will be closed and the investment will disappear.

Even amongst the influencers that aren't promoting fraudulent platforms, it's important to exercise caution. Many influencers in the crypto space will charge a fee to users for investment tips or for them to 'copy' trades. However, most of those aren't qualified to provide investment advice so it's important to also be mindful of who you take advice from.

4. Beware of any promised returns

It's crucial to remember that no investment can offer guaranteed returns. There is a level of risk associated to investing in crypto, and your investment can depreciate. It's important to understand the level of risk you are exposing yourself to before you make any form of investment.

As with many other types of scams, if it feels too good to be true - it most probably is. If an individual or business is offering the guarantee of a profit, it's nearly guaranteed to be fraudulent.

5. Take your time and think it through

One of the biggest tell-tale signs of a scam is a perceived sense of urgency: you will feel pressured to take advantage of a once-in-a-lifetime opportunity and to commit to it quickly. Fraudsters will present some convincing reasons why this is the case. Some will tell you that market fluctuation makes this the opportune moment to invest, others will pitch membership to an exclusive group that's nearly fully subscribed, or offer the opportunity to invest in a brand new crypto asset before its value is due to sky rocket.

Ultimately, if someone is trying to pressure you into parting with money quickly, it's in the hope you will act before you've had time to think things through and evaluate the situation. If you are being pressured into acting fast, it's a fairly reliable sign that you are falling victim to a scam.

If you are interested in investing in cryptocurrency, the tips outlined in this blog should help ensure that you stay safe online. However, it's important to remember the primary rule - trust your gut!

If at any point while trading, something feels off and you have any reason to believe you are dealing with a fraudster, it's best to terminate the interaction immediately, and notify your bank.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551