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Potential scams cryptoasset investors are facing and how they can protect themselves



Given the tumbling financial markets, we’re seeing more people turning to cryptoasset investments, and more falling victim to scams as a result.

Crypto-assets came into existence in the last global financial crisis when trust in banks was at an all-time low. It’s not surprising therefore, that people might want to look to them now, when everything we are so familiar with is so uncertain. However, this is not necessarily the time to change an investment profile to one which is risky and unpredictable.

Joining LeapRate today is Mary Young, dispute resolution partner at law firm Kingsley Napley, speaking about the potential scams investors are facing in the current climate, how they can protect themselves and what they should do if they have fallen victim:

Mary Young
Mary Young

The FCA has guidance on its website about scams relating to COVID-19 which covers most of the points I would have made:

  • Beware anything unsolicited;
  • Beware anything posted or advertised on social media;
  • Don’t click on links or open emails from people you don’t know;
  • Never allow yourself to be rushed into making a decision about how you use or what you do with your own money;
  • Check and double check anyone who contacts you. Don’t use the links on their email, use search engines to find genuine addresses, telephone numbers and the names of people involved with the organisation;
  • Never give out personal details.

There’s nothing inherently wrong with crypto-assets, but it’s a crowded market which few really understand and I doubt anyone could predict in terms of fluctuations in value. For example, between 12 and 13 March Bitcoin dropped from over £6,000 to £3,300 per unit.

crypto scam protection interview

It’s worth bearing in mind that no one is really using crypto-assets, so anyone collecting money for charity in Bitcoin or any other crypto-asset is firstly narrowing the market of people who could donate, and secondly putting its collections at risk of a dramatic drop in value such as mentioned above. And that’s treating it at face value. Unless you’re already known in the crypto-asset market, why would it make any sense to donate funds using Bitcoin or similar? If the collection is genuine, there are likely to be range of ways to donate.

I would suggest that people retain a healthy degree of scepticism about anything which comes out of the blue at any time, but particularly right now.  People with great money-making ideas don’t tend to share those ideas with strangers out of the goodness of their hearts, and if something sounds too good to be true….we all know what that means.

One thing it would be remiss of me not to mention is Authorised Push Payment Fraud, which is when the wrong bank details are provided for a transaction so that money is sent to a fraudster rather than the intended recipient. Fraudsters are getting increasingly sophisticated in their methods so it is worth being extra-vigilant when arranging payments online. Red flags usually involve there being a particular urgency to a payment, and bank details changing at the last minute. Given how infrequently most people and companies change banks, this should be treated with a high degree of suspicion. Checks should be made by calling the person to whom money is to be sent, and again telephone numbers should be obtained online or from early correspondence if possible, rather than relying on numbers included in the most recent email chains. By the end of March many of the major UK banks will add an extra degree of protection by checking whether the name of the recipient matches the name on the account, but until that is taken on by all banks in all countries it’s not an absolute solution.

What to do if you have fallen victim of scam?

There are a number of options available to people who find themselves victims of scams. Civil proceedings can be commenced quickly and Court orders obtained, even when Courts are ‘closed’ or attendance is restricted. The Courts of England and Wales are used to making emergency orders and doing so over the telephone where necessary.

However, civil proceedings can be extremely expensive and as such there is a weighing-up to do in terms of the proportionality of actions taken. Financial scams often involve theft which engages the police or Action Fraud.

Whilst there is no guarantee that any one offence would be investigated, it is possible that one instance fits into a pattern of a larger web of fraud, and is picked up for investigation.

Criminal investigations and prosecutions do not guarantee any recovery for victims, but would help to prevent other people falling victim if the perpetrators are caught, prosecuted and found guilty.

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Potential scams cryptoasset investors are facing and how they can protect themselves

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