How to spot and avoid cryptoasset scams
According to the Canadian Anti-Fraud Centre, thousands of Canadians fall victim to cryptoasset fraud each year.1 These investment scams often rely on sophisticated manipulation techniques and attractive promises. If you’re thinking about investing in cryptoassets, you need to be able to spot the signs of potential fraud and adopt good habits to keep your money safe.
Most common types of cryptoasset fraud
You may think that only techies and investors can fall prey to cryptoasset fraud ... But, they aren’t the only ones! These days, cryptoasset scams target pretty much everyone. Here are some of the most common schemes to watch out for.
Fake cryptocurrency launches and presales
Nowadays, it’s easy for scammers to mint new cryptoassets. Some of them launch presales with the promise of high returns for investors.
The scammers typically keep a significant share of the victims’ cryptoassets. They later resell them after artificially inflating their value using manipulation techniques to increase demand and attract large numbers of investors.
Once the price is high enough, the scammers quickly sell the shares, causing the value to plummet. Investors lose all their money, while the scammers take off with the profits. It’s known as a “pump and dump” scam.
Fraudulent cryptoasset platforms
In this scenario, scammers start by asking you to buy cryptoassets on a legitimate trading platform. Then, once they’ve gained your trust, they say that you can earn better returns if you transfer your digital assets to a new platform. But that platform is fake. You’ll keep receiving statements on how your cryptoassets are doing, but they’re actually no longer in your possession—you’ve just handed them over to cybercriminals.
These fraudulent platforms are often polished and professional-looking. They’re also run by scammers who know how to sound convincing and appear trustworthy. In some cases, they’ll even use the real names of advisors listed on the registers of provincial or territorial regulators.
Fraudulent ads on social media
Scammers often use social media to promote training and offer tips on how to get rich quick with cryptoassets. Some even use artificial intelligence to create videos or images featuring celebrity endorsements of cryptoassets or trading platforms. It’s a tactic designed to grab your attention and lower your guard, so they can steal your personal information, sell you a fake investment or access your cryptoasset wallet.
Investment advice from online friends
You meet someone new on social media or a dating app. You have similar hobbies or interests, sparks fly, and your new relationship blossoms. A few weeks or months later, the topic of cryptoassets comes up and they mention how well their investments have been doing. Your new “friend” offers to help you get the same high returns from these investments. But, it’s a trick! It’s actually a scam—you could lose your assets on a fake crypto website or have your banking information compromised.
Fake collections services
If you’ve fallen victim to a cryptoasset scam, you need to be especially careful going forward. You may be targeted by a new scam: websites offering to help recover what’s been stolen from you. It’s a tactic to steal even more of your money. You might also be asked to pay upfront for the service—and the phony experts will disappear immediately after receiving your payment.
Red flags for cryptoasset investments
- In some cases, the scammer creates a sense of urgency by encouraging you to act fast—whether to get an exclusive advantage or invest in something new on the market. Be mindful that patience and courtesy aren’t always signs of credibility. Scams are getting more and more elaborate, with some schemes lasting several weeks, or even months.
- The offer promises abnormally high returns or a ridiculously low purchase price.
- You’re promised free cryptoassets if you invest a small amount of money first.
- The person you’re talking to downplays your lack of understanding and doesn’t answer your questions, or says things happen “automatically.”
- The platform’s address is outside of Canada, or the person contacting you is in another country.
- The person makes derogatory remarks about financial institutions, the government or other authorities.
Four tips to protect yourself against cryptoasset fraud
With so many new scams emerging, it can be difficult to keep track of them all. Instead of staying on top of every possible scenario, try taking some basic precautions to help keep your cryptoassets safe.
1. Beware of unsolicited offers
Unsolicited investment opportunities can’t be trusted and require extra vigilance—especially if they come from a stranger, someone you met online or a social media post. According to the Canadian Securities Administrators (CSA), investors should be careful about online chat groups and discussion forums, like WhatsApp and Discord, where scammers may pose as experts who can help you invest in cryptoassets.2
2. Check whether the individual or platform is registered with regulators
Any individual or company offering you an investment product must be registered with the regulatory body for your province or territory, like the Ontario Securities Commission or Quebec’s Autorité des marchés financiers. Use the CSA’s National Registration Search to check whether the individual or company is registered. Always use the contact information found in the register when communicating with the advisor.
Also, make sure any trading platform you’re considering or that has been recommended to you is registered with the CSA. Registered platforms must follow strict requirements designed to protect investors. That’s why you should avoid making cryptoasset transactions or transfers on platforms that aren’t listed in the CSA register.
3. Find reliable sources of information
Before you dive in, it’s really important to understand how the different types of cryptoassets, wallets and trading platforms work, as well as the risks involved. Regulatory bodies like the CSA and the Autorité des marchés financiers provide lots of helpful and easy-to-understand information about cryptoassets. Check their websites regularly to stay in the know. You can also use these resources to confirm information you’ve received about an investment.
4. Adopt good cybersecurity habits
Investors can hold cryptoassets in different ways. If you choose to use a digital wallet, make sure you fully understand how it works and never share the secret recovery phrase, which is a series of words that provides access to your wallet.
Always make sure apps are secure before downloading them. They could contain malware that gives hackers access to your computer, phone or the digital wallet where your cryptoassets are stored.
Never access a platform using a link you’ve been given. Instead, look up the information yourself to make sure you’re accessing the platform securely.
Finally, don’t let anyone control your computer remotely, even if they’re offering to help you with a trading platform.
What to do in the event of cryptoasset fraud
Scammers work hard to win you over. They create convincing platforms and prepare explanations that seem credible. It’s easy to get fooled.
If you think you’ve fallen victim to a cryptoasset scam, contact your financial institution immediately. You should also report the scam to the Ontario Securities Commission, Quebec’s Autorité des marchés financiers, or the equivalent organization for your province or territory.
Report the scam to your local police.
Then, report it to the Canadian Anti-Fraud Centre.
They can set up different monitoring and protection measures to secure your accounts, credit file and identity. You can give the authorities valuable information to help fight cybercrime in Canada.
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