How to avoid cryptocurrency scams this Christmas
Whether it’s messages from strange phone numbers asking you to pick up a parcel you haven’t ordered, or people phoning you to ask about a car accident you don’t remember having, it can feel like scams are everywhere.
The newest scam around is cryptocurrency, and it’s on the rise. This year, NatWest raised its first ‘urgent’ cryptocurrency scam alert. Given that we’re getting close to Christmas, with a lot of money changing hands, scammers are spotting an opportunity.
In this article, we’ll explain what cryptocurrency is and how crypto scams work, as well as the warning signs to look out for if you want to avoid the scammers this winter.
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What is cryptocurrency?
Cryptocurrency is a digital or virtual currency that uses cryptography to secure its transactions and to control the creation of new units. Cryptocurrency is a decentralised currency, meaning that it is not subject to government or financial institution control.
Cryptocurrencies are created through a process called mining, in which users solve mathematical problems to release new units of currency. Cryptocurrencies are often traded on decentralised exchanges and can also be used to purchase goods and services.
Why are cryptocurrency scams in the news?
Cryptocurrencies have become increasingly popular in recent years, as they offer a number of benefits over traditional currencies. However, with the increase in popularity has come an increase in cryptocurrency scams.
Cryptocurrency scams occur when someone tries to convince you to invest in a fake cryptocurrency, and cases have recently been on the rise in the UK, with massive financial organisations like NatWest raising the alarm.
The Financial Times Adviser reported in October 2021 that cryptocurrency scams had risen by more than 100% for the fourth year running, with 8,614 cases being reported to Action Fraud over the course of the past year.
How do cryptocurrency scams work?
Cryptocurrency scams typically involve the victim being convinced to invest in a fake cryptocurrency.
The scammer will often promise large returns on investment, or claim that the cryptocurrency is about to go mainstream. They may also try to convince the victim that they are working with a legitimate financial institution.
These scams can take a number of different forms, such as phone calls, emails, or online ads, and usually end with the scammer trying to get you to share your bank details or transfer money directly.
Once the victim has invested, they will usually lose their money, as the cryptocurrency is not real. Cryptocurrency scams can also be used to steal personal information or to install malware on the victim’s computer.
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What happens when people fall victim to cryptocurrency scams?
People who fall victim to cryptocurrency scams can lose a significant amount of money. In some cases, people have lost their life savings to cryptocurrency scams.
Additionally, people who fall victim to cryptocurrency scams may also experience long-term financial hardship as a result of the scam, after having to rely on money from friends, banks, and payday lenders in order to replace the money they’ve lost.
What are some of the warning signs to look out for?
There are a number of warning signs that you can look out for to avoid falling victim to a cryptocurrency scam.
Some of these warning signs include:
Being approached out of the blue with an investment opportunity
Scammers operate by playing a numbers game. They may have your phone number and even your name, but you’ll likely be just one of the thousands of people they’re calling that day hoping one or two will give over their bank details.
That’s why you should always be cautious when you’re approached out of the blue about an investment opportunity, and especially one that would involve money changing hands.
Big investments being required upfront
Even if you’re investing in cryptocurrency with a legitimate outfit, at some point you’re going to have to hand over money to the organisation you’re dealing with. But you wouldn’t expect to discuss bank details or pay your full fee during the first interaction.
Scammers, on the other hand, usually only have one phone call in order to gain your trust and get access to your money. That’s why you should steer clear of any investment opportunity where the caller is urging you to hand over your money there and then.
High returns promised with little risk
In any walk of life, if something sounds too good to be true, it usually is. So if someone calls you up about the investment opportunity of a lifetime, you’re right to be skeptical.
When you receive these phone calls, look out for hyperbolic language. If the caller is promising you can get in on the ground floor with a cryptocurrency and make an easy return on investment with no explanation of the details, hang up the phone.
What should I do if I’ve lost money in a crypto scam?
If you have lost money in a cryptocurrency scam, there are a few things that you can do.
First, you should report the scam to the police. You can also contact Action Fraud, which is the UK’s national fraud and cybercrime reporting centre.
You can also try to get your money back by contacting the company or financial institution that the scammer claimed to be working with. However, this may not be successful, as these companies often have no connection to the scammer.
Finally, you should consider seeking legal advice. This may be especially beneficial if the scam has resulted in significant financial losses.
What can people do to protect themselves against crypto scams?
You can improve your chances of not falling victim to a cryptocurrency scam by doing the following:
- Doing research on cryptocurrencies, as well as those offering them for sale
- Assessing whether or not a company is legitimate by checking their website and social media profiles
- Holding off from making an investment until you have done the proper research
- Checking the FCA register
Whichever course of action you choose to take, it’s important that you do something. None of the above will guarantee that you get your money back, but you’re guaranteed not to if you don’t at least raise the issue.