FCA issues warning as £27m lost to crypto fraud

FCA issues warning as £27m lost to crypto fraud

The Financial Conduct Authority has renewed its warning against online investment scams, which saw victims lose more than £27m to cryptoasset and foreign exchange fraud in the last financial year. 

In partnership with Action Fraud the regulator is urging the public to be wary of "bogus" online trading platforms, which often use social media to promote "get rich quick" investments. 

Using fake celebrity endorsements and "professional-looking" websites fraudsters convince victims to invest, often leading them to believe their first investment made a profit as a means to encouraging further investment and recommendations to friends and family. 

Following false promises of further profits, the returns stop, the victim's account is closed and the scammer ceases all further contact. 

According to the FCA and Action Fraud the number of cryptoasset and foreign exchange scam reports more than tripled in the 2018/19 financial year to 1,834, up from 530 in 2017/18. 

The average victim reportedly lost £14,600 last year, with a total loss of £27,366,127. 

Popular forms of cryptoassets include bitcoin and litecoin, with the regulator most frequently referring to these cryptocurrencies as "exchange tokens". 

Via its ScamSmart campaign the FCA is launching a series of adverts on social media, encouraging consumers to be "more sceptical" of trading scams promising high returns online. 

Pauline Smith, director of Action Fraud, said the figures provide a "stark warning" that people must be wary of fake investments on online trading platforms. 

Ms Smith said: "It’s vital that people carry out the necessary checks to ensure that an investment they’re considering is legitimate.

"Action Fraud is pleased to be partnering with the FCA to raise awareness of online trading scams, and we hope it will help prevent more people falling victim. Remember, if you think you have been a victim, contact Action Fraud."

Mark Steward, executive director of enforcement and market oversight at the FCA, said the public should be suspicious of adverts which promise high returns from online trading platforms. 

Mr Steward said: "Scammers can be very convincing so always do your own research into any firm you are considering investing with, to make sure that they are the real deal.

"Before investing online find out how to protect yourself from scams by visiting the ScamSmart website, and if in any doubt – don’t invest." 

Laura Suter, personal finance analyst at investment platform AJ Bell, said cryptocurrency is a scammer's "paradise", with a "massive" scale of losses. 

Ms Suter said: "Many people ‘investing’ in these assets do little research and are sucked in by the promise of supersized returns in an impossibly short space of time. 

"Using social media and the lure of expensive products to draw people in, scammers have made a fortune off their victims.

"Research from the FCA earlier this year found that people went into cryptocurrencies for all the wrong reasons, and getting rich quick was one of the main motivations for buyers – so it’s not surprising that scammers are capitalising on this."