In 2024, funding scams conned Canadians out of greater than $310 million, and “properly over 50%” of the reported losses have been associated to cryptocurrency investments, the Canadian Anti-Fraud Centre (CAFC) advised MoneySense. Crypto investments are the highest sort of funding scams reported to the CAFC. It’s estimated that fewer than 5% of scams are reported, so the precise losses are possible a lot larger.
Scammers usually discover victims on social media
Cryptocurrency scams are sometimes intertwined with different kinds of scams—and the criminals behind them forged a large web. Con artists continuously discover potential marks on social media. In response to an evaluation by TradingPlatforms based mostly on FTC information, practically one-third of social media crypto fraud occurs on Instagram, and one-quarter on Fb.
Some ruses begin out as romance scams. As soon as suspects acquire a sufferer’s belief and affection, they current an “funding alternative” or request crypto or cash to pay for a made-up expense, resembling medical payments.
Crypto funding scams usually start as relationship and romance frauds, notes Jeff Horncastle, the consumer and communications outreach officer on the CAFC. Fraudsters develop a relationship with their goal and acquire their belief. Then they persuade the goal to spend money on a fraudulent crypto platform—even teaching them on the best way to do it—and promise massive returns. Initially, the goal may even money out their income. Fooled into considering the platform is authentic, they make investments a bigger amount of cash. After they attempt to withdraw their funds, nonetheless, they uncover they’ll’t, and their love curiosity has possible vanished, too.
10 kinds of crypto scams
There are numerous kinds of scams to be careful for, and sadly, as traders get savvier, the cons evolve and develop into trickier to identify. To guard your self, at all times know the place your cash goes, perceive the crypto promoting guidelines in Canada, and solely use trusted and compliant crypto buying and selling service suppliers. (As a place to begin, see MoneySense’s picks for the prime crypto platforms in Canada, all of which securities regulators have accredited to do enterprise on this nation.) An exhaustive record of crypto scams is probably going not possible, however to guard your self, listed here are 10 to be careful for.
The most effective crypto platforms and apps
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1. Pump-and-dump, or rug pull
In a “pump and dump” or “rug pull” scheme, promoters of a cryptocurrency hype it as much as increase demand, and when the worth soars, they promote all their cash for a fast revenue. As a result of they promote in massive volumes, different traders get nervous and promote their cash, too. As panic units in and the promoting spreads, the coin’s worth plunges. The promoters get wealthy and small traders are left “holding the bag,” confronted with enormous losses.
A infamous instance of an alleged crypto pump-and-dump scheme is a coin referred to as Squid Sport. Launched in October 2021, it rode the recognition of the Netflix sequence of the identical identify—regardless of having no affiliation. Lower than two weeks later, Squid Sport’s crypto builders instantly offered their holdings when the coin’s worth hit $2,800, making themselves $3.3 million richer (all figures in U.S. foreign money). As we speak, one Squid coin is price a few tenth of a penny.
The pump-and-dump rip-off just isn’t distinctive to crypto, after all. It’s what high-flying stockbroker Jordan Belfort—the topic of the Hollywood movie The Wolf of Wall Road, starring Leonardo DiCaprio—engaged in through the Nineties. His agency was accused of artificially inflating the worth of penny shares earlier than promoting their shares to make a number of quick cash—costing traders as much as $200 million. Within the early 2000s, Belfort served 22 months in federal jail for securities fraud. He’s now advertising and marketing himself as an funding guru.