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Fraudulent crypto-trading platforms luring in Canadians, officials warn

Fraudsters target investors hoping to get in 'on the ground floor'
The cryptocurrency scams vary but have common hallmarks.

Fraudulent online cryptocurrency-trading platforms are increasingly targeting Canadian investors, prompting a warning from the B.C. Securities Commission and other national regulators.

On Monday, the Canadian Securities Administrators (CSA), including the B.C. Securities Commission, warned how some people are getting roped into scams attempting to capitalize on market interest in cryptocurrency assets, such as Bitcoin or Ethereum.

The scams may vary from one another but have common hallmarks, such as being promoted through email, texts, websites and social networks that exploit the current popularity of cryptocurrency, a digital currency produced via online transactions that can be bought for cash but has yet to take root in common consumer transactions.

Fraudsters target investors hoping to get in ‘on the ground floor’ with crypto assets and exploit their fear of missing out on the opportunity of a lifetime, stated the CSA.

Investors are reporting being directed by marketing materials to these fake, often spoofed, trading platforms where deposits are made and the crypto asset appears in an account. Investors are then encouraged to transfer the crypto assets to a fraudulent, third-party investment website.

Software downloaded by investors may even be used by fraudsters to remotely access their computer for supposed assistance purchasing crypto assets and transferring funds.

Next, investors may see fake gains on their investment, through manipulated statements. They are then coaxed into making further deposits.

“Some websites will let investors withdraw a portion of their money to build trust and entice victims to invest more, but any request to withdraw all assets will fail. Ultimately, fraudsters will no longer respond to communication requests from investors,” stated CSA.

Last September, the CSA issued guidance to crypto-trading platforms (CTPS). As law firm McCarthy Tetrault points out, “CTPs with clients resident in Canada are considered by Canadian securities regulators to be subject to securities law if, for example, the crypto assets are not immediately delivered to clients. Foreign-based CTPs with clients in Canada are also considered to be caught by Canadian securities laws.” 

How do I protect myself from crypto scams?

There are measures people can take to protect themselves.

You can find out if the firm or individual involved is registered by checking the CSA National Register. If it is registered, you’re advised by officials to call the listed phone number to confirm any solicitation.

The CSA also encourages investors to:

  • Not rely on unsolicited marketing materials. Do an internet search for the company name and verify the contact information with the financial institution or firm directly.
  • Check for misspellings or variations on the company name in the website or email address, including adding extra letters or hyphens to make the fake address look close to the real address.
  • Compare and confirm websites. Fake websites may often have odd-looking (or low-resolution) logos that do not match the logo of the legitimate company. Do an internet search for the company to determine if the website is legitimate or a duplicate of the real company’s site.
  • Refuse to download software that allows remote access to your computer.
  • Never give in to pressure or blackmail: transfer your money only after taking the time to think carefully.
  • Never share personal information or make any payment before performing these checks.