Red flags of crypto investment fraud
Unregistered crypto trading platforms:
One of the most important steps you can take before investing in crypto is to verify that the trading platform you plan to use is registered with securities regulators in Canada. If a crypto trading platform is not registered there are no assurances that any of the typical investor protections that may exist when using a registered dealer are present. These protections are intended to address matters such as secure handling of client funds, safekeeping of client assets, protection of personal information, pre-trade disclosures, and measures against market manipulation and/or unfair trading. Remember, even if you are using a registered crypto trading platform, you should be aware that fraudsters will often direct victims to purchase crypto on a registered platform and then transfer the crypto out to them under the guise of being able to provide better returns or lower trading fees through their trading platform. Once you have transferred your crypto to these unknown individuals or unregistered trading platforms, the crypto is usually gone for good.
You can view the current list of registered, pre-registered (those that are working towards full registration requirements) and banned crypto trading platforms below:
Investors should also review the Canadian Securities Administrators national investor alerts list which highlights persons or companies who appear to be engaging in securities activities that may pose a risk to investors.
Unsolicited crypto investment offers:
Random and unprompted crypto investment opportunities can be offered in person and more commonly, through online social media/dating apps, chat forums, websites and advertisements. These offers are usually fraudulent. Also, beware of anyone promoting an opportunity who wants to communicate through messaging apps like Telegram, WhatsApp or Signal.
Remote access scams:
Fraudsters pitching crypto investments online may try to convince you to give them remote access to your computer to “help” you set up crypto accounts or purchase/transfer crypto assets or funds to them. This is a common way for fraudsters to steal personal information, including bank account numbers and passwords. A remote access software called AnyDesk is often used for these nefarious schemes.
Exceptional returns with little or no risk:
If it sounds too good to be true, it usually is. Crypto or not – all investments contain a certain degree of risk. The general rule of thumb is the higher the level of risk, the higher the potential return or losses, but there are no guarantees that high-risk investments will provide a return. Scammers often make exaggerated claims about returns you can earn if you invest in their crypto investment offer or through an unregistered crypto trading platform. Avoid any investment offer or crypto trading platform that guarantees high returns with little or no risk.
Crypto recovery schemes:
If you were a victim of a crypto investment scam previously, do not contact or respond to anyone claiming that they can locate or recover your crypto assets or funds. Neither their fees nor their service are legitimate.
Now or never opportunities:
Investment scams that claim to be a limited-time offer or have a deadline are designed to create a sense of urgency that prevents you from doing thorough research. Ignore all time-sensitive and exclusive investment offers and always take your time to research the legitimacy of any investment you are considering and if it aligns with your risk tolerance and financial plan.
Flashy good looks:
Appealing or professional-looking trading platforms do not mean they are legitimate and working within regulatory compliance. While first impressions are important, promotional materials such as social media ads, testimonials from purported customers, celebrity endorsements, and websites can all be easily fabricated. Nothing replaces checking and confirming the crypto trading platform’s registration.
Difficulty withdrawing funds:
If a crypto investment requires additional fees or taxes to be paid for you to withdraw your earnings, it is likely a fraudulent scheme. Victims often pay more money attempting to retrieve lost funds, only to later learn they have been further defrauded. Never pay any additional fees to retrieve your original investment.
Pyramid or ponzi schemes:
People tend to let their guard down around family and friends. However, victims are often unknowingly introduced to scams by people they know and trust. Be wary of crypto investment opportunities that rely on recruitment and promise bonuses or higher returns based on the number of additional people recruited. These schemes operate like pyramids or ponzi schemes, and will ultimately collapse with most of the money “invested” going to the fraudster.
Tips for avoiding crypto scams and fraudsters
Whether you are interested in crypto or not, there are sound ways you can protect yourself from fraudulent investment offers and fraudsters looking for their next mark.
Improve your online privacy:
Fraudsters patrol social media websites looking for targets for scams. Make your social media accounts fully private to limit the amount of personal information available to anyone you don’t know or trust.
CheckFirst before you invest:
Confirm the registration of any crypto asset trading platform you plan to use on our Investing in crypto assets page or through the Canadian Securities Administrators’ crypto trading platforms regulation and enforcement actions page before you invest. Investors should also consult the CSA Investment Alerts. This page highlights individuals and companies who appear to be engaging in securities activities that may pose a risk to investors.
If it sounds too good to be true…:
Every investment carries some level of risk. If you are unable to identify any risks with an investment offer and returns seem exciting, you may be looking at a scam. The higher the potential return of an investment, the higher the level of risk – there are never guarantees.
Contact the ASC:
If you or someone you know has received a suspicious crypto investment offer or if you feel you have been defrauded through a crypto scam or fraudulent crypto trading platform, contact the Alberta Securities Commission (ASC).
