FCA warns of crypto clone firms

FCA warns of crypto clone firms

The Financial Conduct Authority has warned consumers this week about clone firms in the cryptocurrency market.

The regulator has issued two warnings with regards to fraudsters using the details of FCA authorised companies to create a ‘clone firm’, with which they then contact consumers in the UK.

The FCA has warned that Fair Oaks Crypto and Good Crypto are clones of authorised firms Fair Oaks Capital Limited and Arup Corporate Finance Ltd and both are using the legitimate companies’ details as part of a scam tactic.  

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The warnings stated that the real, FCA authorised firms have no association with the clone companies.

In light of UK consumers increasingly being targeted by cryptocurrency-related investment scams, the FCA clarified earlier this year that, as a currency not regulated in the UK, the transfer, purchase and sale of cryptocurrencies fell outside its regulatory remit.

As with Fair Oaks Crytpo and Good Crypto, the FCA warned that cryptocurrency fraudsters usually claim to have a prestigious London address but are usually based outside of the UK.

The FCA warned that fraudulent firms can manipulate software to distort prices and investment returns while scamming people into buying non-existent cryptocurrencies. They can then be known to suddenly close customer accounts and refuse to transfer funds.

As cryptocurrencies are not regulated by the FCA, investments are not protected by the UK’s Financial Services Compensation Scheme and victims are unlikely to recover lost funds.

Ray Boulger, senior technical manager at John Charcol, agreed that cryptocurrencies are "ultra" risky and are to be seen as a gamble rather than an investment.

He said: "There have been a number of cases in the past where some crypto-exchanges have gone bust and total losses have been quite substantial.

"There is little or no regulation at all and if these go wrong you are pretty much on your own - it is important that people understand the risk but also the redress if things go wrong."

The FCA also issued a warning last night of another clone firm, Horst Weinmann, fraudulently using the details of EEA authorised firm Horst Weinmann based in Germany.