Cryptocurrency scammers are using fake celebrity endorsements and social media to trick victims into investing in fraudulent bitcoin projects, the Financial Conduct Authority (FCA) has warned.
Cryptocurrencies such as bitcoin and ether are not regulated in Britain, and the FCA said it has received a rising number of reports about investment scams that claim to offer high returns.
Some scams have falsely claimed to be endorsed by Deborah Meaden from Dragon’s Den and Martin Lewis, the founder of MoneySavingExpert.com.
Given that cryptocurrencies are not regulated, consumers are unlikely to get their money back, and are not protected by the Financial Services Compensation Scheme (FSCS).
The warning comes in the same week that reports emerged of a 22-year-old Finnish man losing $35 million worth of bitcoin in a major cryptocurrency scam.
“In recent months, the FCA has received an increasing number of reports about cryptocurrency investment scams, some of which may involve regulated activities, others which don’t, but all of which use similar tactics,” the FCA said on Friday.
The FCA warned that UK consumers are being targeted by scammers with investment opportunities related to cryptocurrencies.
The fraudsters often use social media or images of well-known celebrities to promote their cryptocurrency investment scams, the watchdog said.
The bitcoin scam involved a new cryptocurrency called Dragon Coin.
“The firms operating the scams are usually based outside of the UK but will claim to have a UK presence, often a prestigious City of London address,” the FCA said.
“Scam firms can manipulate software to distort prices and investment returns. They may scam people into buying non-existent cryptocurrencies. They are also known to suddenly close consumers’ online accounts and refuse to transfer the funds to them or ask for more money before the funds can be transferred.”
A similar warning on cryptocurrency scams was issued by Action Fraud in April after it received 21 reports of fraudulent activity that had resulted in victims losing £34,000.
“With the growing sophistication of online fraud, it becomes increasingly important to carry out checks before parting with cash online,” Dragons’ Den investor Deborah Meaden said.
” A quick Google search will often reveal the truth and all online advertising should be read set against the premise of ‘If it looks too good to be true then it probably is’.”
