Cryptoassets are generating growing interest. However, their increasing popularity is also attracting fraudsters eager to profit from naive investors by using compelling pitches or offering them “golden” opportunities. Knowing how to spot scams is crucial to protect your money and avoid pitfalls.

[Translate to English:] Image décorative : fraude liée aux cryptos

Understanding cryptoasset fraud

Cryptoasset fraud occurs when a scammer, taking advantage of the growing appeal of cryptoassets, parts you from your money with promises of quick, high returns, then ultimately vanishes. They often use well-thought-out strategies to get you to invest. They’ll post enticing ads, solicit you over social media and even engage the services of influencers. These scams are often perpetrated by individuals or organized, structured groups that are highly skilled at manipulating investors. Their goal is to extract ever larger amounts of money from you before they vanish, leaving you with significant losses.

Red flags

Investors are increasingly attracted to cryptoassets because of their innovativeness and potential for high returns. However, their growing popularity has also created fertile ground for scams. The scams take many forms. Knowing how to spot them is important if you want to protect yourself and avoid financial losses.

Here are some red flags to help you spot a fraud attempt:

Decorative image: example of an eye-catching advert about online trading

Aggressive ads offering training, advice and promises of unrealistic returns

Social media scams often include attractive ads offering training and advice on how to quickly become a cryptoasset expert. Behind these offers are fraudsters seeking to make initial contact with you and earn your trust. Their goal is to extract personal information, and as much money as possible, from you by getting you to follow their advice or buy their services.

Decorative image: text chat

Help and advice from a “new on-line friend”

This type of scam often starts with an on-line date on a dating app or social media platform. A so-called “friend” strikes up a conversation about shared hobbies or interests. Then, after exchanging pleasantries, they tell you about their investments in cryptoassets and the high returns they’ve supposedly made. Gradually, they build a relationship of trust with you and offer to help you to also benefit from high-return investments. Often this involves investing in cryptoassets on an on-line platform that looks legitimate and credible but is actually fraudulent. Eventually, this “new friend” disappears with your money, leaving you with no recourse.

Decorative image: Crypto trading platform

The promise of participating in the launch of a new cryptoasset with potentially high returns

Initial cryptoasset offerings, commonly referred to as ICOs (initial coin offerings), are very risky and volatile investments. While some are legitimate, many have turned out to be fraudulent. Scammers often use such offerings to lure investors with promises of huge returns and then disappear with their money.

Decorative image: cryptos

Encouragement to move cryptoassets from one platform to another

Fraudsters may persuade you to buy cryptoassets on one platform and then, after falsely building a relationship of trust with you, convince you that transferring the cryptoassets to another platform will increase your returns. The second, “better-performing” platform is actually fraudulent and displays fake results. After the transfer is made, your cryptoassets will be stolen, and you won’t be able to recover them.

Warning

Fraudsters seeking to earn your trust

Scammers will often use psychological strategies to earn your trust. If you seem reticent, they may start by asking you for a small investment. To reassure you, they will allow you to withdraw your funds, including any purported gains. Once trust has been established, the scammers will do everything possible to convince you to increase your investment. If you try to withdraw large amounts, they may tell you there’s some kind fee or time period required. Eventually, the platform and the scammers will vanish with your money.

End of the warning

Antoine and the appeal of crypto

Antoine has been curious about investing for a while now. He’s been seeing an increasing amount of crypto-related content on social media. A lot of people appear to be turning quick profits. One day, an influencer he has been following recommends a new crypto that, according to him, “is poised to shoot up in value.” Antoine is impressed by the influencer’s comfort level and confidence, telling himself that someone that self-assured has to know what they’re talking about.

When influence directs your actions

The influencer regularly posts videos of himself explaining things in simple and convincing language. He presents examples of impressive returns and says he wants to help his followers “get ahead financially.” Antoine listens, watches and is soon won over by the impression of credibility. He feels like he is being guided by someone who sincerely wants to advise him.

Antoine thinks of his children and about the cost of putting them through university and paying for his youngest child’s orthodontic work. He tells himself a financial boost would be a big help. Persuaded by the confidence in the influencer’s tone, Antoine decides to take a chance. He invests a small sum of money simply to check whether the influencer’s promises hold up.

The lure of promised returns

It only takes a few days for the platform to begin showing profits for Antoine. The influencer keeps repeating that “the window of opportunity is closing quickly” and those who hesitate will “miss out” on a golden opportunity. Overcome by a sense of urgency, Antoine increases the amounts invested.

What he doesn’t know is that the influencer is being paid to promote the cryptocurrency. Antoine has no clue what the actual intentions of the people behind the scam are.

The shock of discovery

One morning, Antoine goes to check his account and discovers that the platforms associated with the project are no longer showing any activity. His money has been embezzled. Meanwhile, the influencer appears to have vanished into thin air. Antoine realizes that he has been tricked. He thinks about the money he was setting aside for his children and the plans that are now in jeopardy. He feels ashamed and angry and beats himself up for not having done more homework before investing.

He then learns that he’s lost more that just money: his confidence is shaken, decision making is harder, and he feels cheated. And yet, it's not his fault. Fraudsters use powerful persuasion techniques and know how to exploit people’s emotions. Recovering will take time… and support.

Tips and advice to protect yourself

With the growing popularity of cryptoassets, it has become increasingly difficult to distinguish legitimate offers from scams. However, you can protect your investments and avoid common pitfalls by remaining vigilant and taking a few simple precautions. Here are helpful tips:

  • Beware of promises of unrealistic returns. There’s no such thing as a high-yield, risk-free investment. If an offer seems to be too good to be true, it’s probably a scam.
  • Make sure that the individual contacting you and the cryptoasset trading platform are registered with the AMF. Use the contact information in the register to contact the individual and verify their identity.
  • Refuse to transfer cryptoassets to platforms not registered with the AMF.
  • Be vigilant if the platform is not based in Canada. Be wary of companies that do no have a Canadian civic address or people who contact you from abroad.
  • Take some time to think things through. Make sure you have all the necessary information and understand the risks before you invest.
  • Avoid investments offered over social media. Don't respond to solicitations from strangers over social media, especially if you haven’t contacted them yourself.
  • Never give out your confidential information. Never give your passwords or access to your computer to anyone, especially not strangers claiming to want to help you invest.
  • Do your own research. Consult several reliable sources and don’t hesitate to contact the AMF to verify the legitimacy of a platform or offer.

What to do in the event of fraud

Anyone can be a victim of fraud, so don’t beat yourself up. Cryptoasset scams often rely on promises of exceptional returns, using misconceptions about or the excitement surrounding these new technologies to manipulate investors.

  • Refer to the You're a victim of fraud? page to find out what to do, and contact the AMF if the fraud involves purported investments.
  • Break off all communications with the person or persons involved and stop sending money.

Be careful: Fraudsters often target their victims more than once. They may contact you claiming to be a lawyer, financial institution or firm specializing in financial fraud cases and offer to recover the money you lost.

Resources to help you stay vigilant

  • Our investor warnings: Check the warning list of websites and companies carrying on potentially high-risk investment activities in Québec in contravention of the laws administered by the AMF.
  • Our news releases: The AMF cautions the public about companies or individuals whenever there is a risk of Québec investors being cheated out of their money.
  • Our Information Centre: The AMF Information Centre can help you find the information you need to know before you invest.