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Cryptocurrency and foreign exchange (forex) scams tripled in the last financial year, according to new data from the UK financial watchdog, the Financial Conduct Authority (FCA.) Total losses from fraudulent online trading platforms totalled £27 million ($34 million), the authority reported on Monday. The vast majority of which—some 81 percent of claims—were due to cryptocurrency scams.
The FCA warns that fraudsters are still using social media, fake celebrity endorsements and images of expensive cars and watches to tempt gullible would-be investors. The news will come as no surprise to anyone familiar with the crypto world. Decrypt reported this kind of activity was still running rampant in late 2018, and shows no signs of abating this year.
“Criminals follow the money, and this report from the FCA shows they are taking advantage of consumers’ lack of understanding about crypto assets,” Kevin Murcko, CEO of crypto exchange CoinMetro, told Decrypt. “The key message for investors is to always do your own research, and if an investment sounds too good to be true, it probably is.”
However, while the the number of claims rose from 530 to 1,834 in the 2018/19 financial year ending in early April, the FCA said that average individual losses dropped from £59,600 to £14,600. Overall, total losses fell from about £38m to £27m.
In the report, cryptocurrency activity has been grouped with forex, as the two hold similar opportunities for fraudsters. “The same scams have been operating in forex, long before cryptocurrencies hit the headlines. It is about targeting individuals with promises of high profits. This is the same old fraudulent activity but in a new guise,” said Murcko.
The FCA is part of the UK government-led Cryptoasset Taskforce, established in 2018, whose job it is to crack down on fraud. A consultation on the Taskforce’s purview is currently underway, with one of the outcomes allowing the group to police a larger part of the crypto industry. In the meantime, the watchdog is considering a ban on high-risk derivative products linked to cryptoassets for UK investors. These, it says, often result in the heaviest losses to investors.
While the crypto winter may be behind us, crypto’s dark underbelly is still going strong.