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Crypto Asset-related Scam

Fraudsters use the popularity and complexity of crypto assets to lure investors into scams.

What are Crypto Assets?

Crypto assets include cryptocurrencies, blockchain companies, cryptocurrency funds, initial coin offerings (ICOs), initial token offerings (ITOs), and initial exchange offerings (IEOs). Learn more about these products and the associated risks.

Many people use the term “cryptocurrencies” when referring to crypto assets. However, while many crypto assets are digital mediums of exchange (and therefore act similar to currencies), not everything that is referred to as a cryptocurrency is a digital medium of exchange, but could be a crypto asset with other properties.

In recent years, certain crypto assets have generated interest from investors and the financial media. These products are considered high-risk because of their speculative nature. When a person is speculating on a crypto asset, they are generally focused on trying to profit from changes in the crypto asset’s market value.

Not all crypto assets are securities. The BC Securities Commission (BCSC) only regulates crypto assets that are considered securities under B.C. laws. It’s also important to keep in mind that the BCSC and many Canadian securities regulators urge caution when buying crypto assets through trading platforms.

How Does a Crypto Asset-related Scam Work?

  • A fraudster may claim to place an investor’s money in a proprietary crypto asset trading platform, while promising high, guaranteed returns with little or no risk.
  • Once the investor invests, often by using a digital currency, the fraudster may stop communicating with the investor. The fraudster may then transfer the investor’s money overseas, making it very difficult for the investor to get it back.
  • Alternatively, when the investor checks their account on the crypto asset trading platform, it may show that the investor has made high returns on the investment; however, the stated trading profits are likely fake.
  • The fraudster may ask the investor to send more money (claiming that it is needed to pay taxes or other fees), in order for the investor to withdraw non-existent profits made through the proprietary crypto asset trading platform. The fraudsters can then transfer the investor’s money overseas, thus, victimizing the investor all over again.

Watch out for one or more of these characteristics of crypto asset-related scams:

  • “Guaranteed” high return on an investment. All investments have risk, and investors should question any investments that have a “guaranteed” return.
  • Complicated jargon and language that is difficult to understand. Fraudsters often use complex new technologies as an opportunity to carry out fraudulent investment schemes, including emerging technologies like blockchain or artificial intelligence. Investors should always be suspicious of sales pitches that are difficult to understand.
  • Unlicensed salesperson. Many investment frauds involve unlicensed individuals or unregistered firms. Learn how to check the registration of an individual or firm here.
  • Unsolicited offers. Some fraudulent investment schemes operate by sending unsolicited sales pitches to their victims. Exercise extreme caution if you receive an unsolicited communication. Some examples are email messages, telephone calls, direct messages through social media, or internet pop-up advertisements and videos.
  • Pressure to buy. Fraudsters may try to create a false sense of urgency to take advantage of an investment “before it’s too late”.  Take your time researching an investment opportunity, ask questions, search the internet, and talk to a registered professional before making a decision.

Crypto Quiz

Test Your Crypto Asset Knowledge.

This quiz is designed to introduce you to the basics of crypto assets. It is not intended to provide investment or financial advice, and should not be relied upon as a substitute for such advice.

Cryptocurrencies and blockchain are the same thing.