Belgium’s Financial Services and Markets Authority has published a public service announcement warning would-be investors against 99 scam cryptocurrency websites. They have also published a guide to help investors avoid being taken in by crypto fraud.
How Does Fraud Start?
The FSMA warns that in many cases, crypto swindlers will find a way of making first contact with you to offer what might appear at first glance to be a lucrative proposal. Fraudsters often publish advertisements on social media that are linked to websites that build up a lot of cryptocurrency hype. Typically, users who visit these sites will be asked to fill out contact information and will be contacted within a few days from a salesperson.
“These types of swindlers are also very active on social media such as Facebook, which they use to promote their ‘investments’. So be careful about ‘liking’ a page!” the FSMA warns.
Sometimes personal information isn’t even necessary to initiate a crypto scam, as the FSMA has documented many instances of scammers contacting victims through simple “cold calling.”
“Once the fraudsters have your contact details, they offer you an investment they claim is secure, easy and very lucrative,” said the FSMA. “They try to inspire confidence by assuring you that you don’t need to be an expert in cryptocurrencies in order to invest in them. They claim to have specialists who will manage your investments for you.”
Oftentimes fraudsters will offer victims investments with absurdly high returns, sometimes over 8% per month. Victims will also be reassured that they can withdraw their money fast, whenever they want, and that their funds will be fully returned even if the market collapses.
“Generally speaking, it is hard to tell that one has been the victim of investment fraud,” writes the FSMA. “Often for several months, the swindlers manage to maintain the illusion that this is an entirely legitimate and highly profitable investment, thereby encouraging their victims to invest even more.”
Swindlers typically build professional-looking websites where investors can track their investment progress; they might even make a pay out or two to reassure victims that their investment is safe. But don’t be fooled, as this is often an attempt to get you to invest even more money before they fraudsters take off with your funds.
“In some cases, the swindlers ask you to pay capital gains tax or exit fees before you can receive your earnings. But these are simply pretexts to get you to make one last payment: as soon as these ‘fees’ are paid, the fraudsters disappear with your money and cut off all contact.”
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How to Protect Yourself Against Fraud
The FSMA recommends the following before investing in any crypto scheme:
- Always be sure the identity of the company you are working with can be clearly obtained. Be on the lookout for any indication of investment fraud. If a company claims to hold authorization from supervisory authorities, contact those entities before investing.
- Ask for clear and comprehensive information about the investment, and take a critical look at the information provided.
- Remember that if returns sound too good to be true, they probably are. Don’t be tricked into believing hype.
Finally, the FSMA has published a list of 99 known cryptocurrency trading platforms for which it has detected indications of fraud. This is by no means a complete list, however, as many fraudulent crypto companies have not yet been detected by the authorities.
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