Cryptocurrency has become more and more popular in recent years with the number of people owning cryptocurrency continuing to grow. However, this has also led to a significant increase in the volume of cryptocurrency-related fraud and scams in the UK.
The Complex World of Crypto
Cryptocurrency and blockchain are not easy to understand and many fraudsters take advantage of this to entice people into their scams. Often they will play on a lack of understanding to defraud people or offer to simplify the purchasing of cryptocurrency for people, only for them to disappear with people’s money or cryptocurrency.
By being aware of a number of the scams which are used by fraudsters, people may be able to prevent themselves from falling victim to them.
Common Cryptocurrency Scams
There are a number of cryptocurrency scams which you should be aware of or may be a victim of, these include the below.
1. Rug Pull Scams
A scam such as this is typically where a new cryptocurrency is created and people are convinced to invest in the token only for the cryptocurrency to be liquidated taking either all of the investors’ money or selling a large allocation of the token meaning the value drastically reduces and investors holdings are worthless.
2. Phishing Scams
Phishing scams are particularly common scams whereby scammers may pose as well-known companies in order for a person to provide details such as wallet keys which then enables the scammers to access the person’s cryptocurrency.
3. Cryptocurrency Exchange Scams
Scammers may impersonate cryptocurrency exchanges, be those new businesses with an impressive website or established exchanges which it may be difficult to detect are not genuine. Customers will buy what they believe is cryptocurrency from fake exchanges only for this money to be stolen and to never receive the cryptocurrency. Alternatively, customers may transfer their cryptocurrency to the exchange only for this to be stolen from the account.
4. Flash Loan Scams
Flash loan scams, also known as flash loan attacks, are usually complex and involve someone using a Decentralised Finance protocol on the blockchain to borrow large amounts of unsecured or uncollaterised cryptocurrency which they then use to obtain further cryptocurrency and manipulate the market generating profit to repay the loan and then exit with profit whilst the protocol or cryptocurrency price crashes.
How to Spot Cryptocurrency Fraud
Whilst cryptocurrency scams are becoming increasingly sophisticated, there are signs that you can be wary of in identifying whether it may be a scam or not, these include:
- Cryptocurrency being advertised on social media
- Promising high levels of return in a short period of time;
- Unsolicited emails or calls alleging to be from legitimate companies asking you to provide details of your cryptocurrency and wallets;
- The cryptocurrency exchange or token is new with very little information online about it; and
- The firm or exchange you are buying cryptocurrency from is not registered with the FCA.
Making a Cryptocurrency Scam / Fraud Claim
In recent years the Courts have been extremely willing to extend a number of remedies to claimants who have been victims of cryptocurrency scams or thefts including granting worldwide freezing injunctions and disclosure orders even where the potential scammer is unknown.
Ellis Jones is well placed to advise you on all the options available to you and the course of action which suits your claim best in order to try and recover any stolen cryptocurrency or money.
Specialist Cryptocurrency Scam / Fraud Solicitors
Ellis Jones can assist in litigation against individuals, exchanges and cryptocurrency platforms where you may have been a victim of a scam. We have acted in obtaining a freezing injunction in relation to a cryptocurrency scam, acted against a cryptocurrency creator in respect of a rug pull fraud, and considered every avenue in how to recover assets.
Ellis Jones has a wide professional network to draw upon to ensure clients are provided with as much support as possible and fully advised at every step of the way. Get in touch with the team to find out how we can help you.
Cryptocurrency Fraud & Scam FAQs
Can crypto scammers be traced?
Transactions on the blockchain are able to be seen in public wallet addresses. If you are able to identify a scammer’s wallet from there they may transfer the cryptocurrency to an exchange in order to convert it into money. From this information you may be able to identify the scammer by contacting the exchange. However, scammers will likely move cryptocurrency quickly and make a number of transactions to make it harder to trace so it is important to act as soon as possible if you believe you are a victim of a scam.
What should I do if I get scammed in crypto?
If you believe you have been a victim of a cryptocurrency scam you should contact your bank or the exchange used to see if they are able to either to prevent transactions or trace where the money and cryptocurrency has gone. Being able to identify possible wallets the cryptocurrency has gone to could assist with recovery.