The UK financial services regulatory body and industry specialists have joined forces to warn investors about the perils of online investments into cryptocurrencies, such as Bitcoin.
The warnings follow last week's news that cryptocurrency exchange Binance suffered what it termed a "large scale security breach" last week with hackers transferring 7,000 Bitcoin valued at about $40m in one transaction from the company's hot wallet.
Binance is of the world's best cryptocurrency exchanges having recently moved to Malta after first starting up in Hong Kong.
In the UK, morenthan £27m in losses to csuch cybercrines have been reported in the last year. In partnership with Action Fraud the UK's Financal Conduct Authority is urging the public to be wary of "bogus" online trading platforms, which often use social media to promote "get rich quick" investments.
Using fake celebrity endorsements and "professional-looking" websites fraudsters convince victims to invest, often leading them to believe their first investment made a profit as a means to encouraging further investment and recommendations to friends and family.
According to the FCA and Action Fraud the number of cryptoasset and foreign exchange scam reports more than tripled in the 2018/19 financial year to 1,834, up from 530 in 2017/18. The average victim reportedly lost £14,600 last year, with a total loss of £27,366,127.
'Scammer's paradise'
Laura Suter, personal finance analyst at investment platform AJ Bell, "Cryptocurrency is a scammers' paradise, as many people ‘investing' in these assets do little research and are sucked in by the promise of supersized returns in an impossibly short space of time. Using social media and the lure of expensive products to draw people in, scammers have made a fortune off their victims.
"Research from the FCA earlier this year found that people went into cryptocurrencies for all the wrong reasons, and getting rich quick was one of the main motivations for buyers - so it's not surprising that scammers are capitalising on this. The scale of the losses are massive, with the average victim losing £14,600, and in many cases those victims will also have persuaded friends and family to invest too.
'Stark warning'
Pauline Smith, director of Action Fraud, said the figures provide a "stark warning" that people must be wary of fake investments on online trading platforms. "It's vital that people carry out the necessary checks to ensure that an investment they're considering is legitimate," she said. "Action Fraud is pleased to be partnering with the FCA to raise awareness of online trading scams, and we hope it will help prevent more people falling victim. Remember, if you think you have been a victim, contact Action Fraud."
Mark Steward, executive director of enforcement and market oversight at the FCA, said the public should be suspicious of adverts which promise high returns from online trading platforms.
"Scammers can be very convincing so always do your own research into any firm you are considering investing with, to make sure that they are the real deal," said Steward. "Before investing online find out how to protect yourself from scams by visiting the ScamSmart website, and if in any doubt - don't invest."
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