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Investors – why you need to be wary of cryptocurrency investment fraud

Here at PIT, we have covered a number of stories in recent times about the potential dangers of get-rich-quick schemes, often touted around by ‘property gurus’ or ‘property entrepreneurs’ on social media and through direct mails, with bold, outlandish claims about making huge amounts of money in a very short space of time.

But it’s not just traditional investment areas where such dubious schemes thrive, there is now an increasing trend for cryptocurrency investment get-rich-quick schemes.

According to a recent article on financial website This is Money, there has been an ‘explosion’ in cryptocurrency investment fraud as a result of scammers pretending to be billionaire Tesla founder Elon Musk and a barrage of ‘get-rich-quick’ initiatives.


Findings from law firm Pinsent Masons show that reports of investors being hoodwinked into fake investments for digital currencies such as bitcoin have doubled in the past 12 months.

The article says that around 3,600 scams were reported to Action Fraud in the year to March 2020, but this had rocketed to more than 7,000 by March 2021 – perhaps in part because of the coronavirus crisis, people spending more time at home and people losing their jobs or being on furlough and seeking out greater financial security in a speedy fashion.

Fraudsters most often target vulnerable or financially compromised people to improve the chances of their scams succeeding.

Retail and property investors have been eager to cash in on the current crypto boom – and there are legitimate ways of doing so, even if cryptocurrencies are famously volatile and unpredictable, and come with many potential risks attached.

But, as the This is Money article points out, fraudsters are ready to pounce too. They will pretend to be high-profile crypto-backers like Elon Musk, and pledge to double a victim’s money if they send them digital coins.

In addition, what are known as ‘pump-and-dump’ scams have been widespread. A pump and dump scam is defined as the illegal act of someone promoting a stock they hold and selling once the stock price has risen following a surge in interest.

“Fraudsters get attracted to almost all new investment trends. What is different is the size of the retail investor feeding frenzy around cryptocurrencies, which has attracted many more sharks,” Hinesh Shah, senior associate at Pinsent Masons, said.

What does Action Fraud say?

Action Fraud, the UK’s national reporting centre for fraud and cybercrime, says cryptocurrency investment fraud typically works in the following way.

Fraudsters will cold call victims and use social media platforms to advertise ‘get rich quick’ investments in mining and trading in cryptocurrencies.

Fraudsters will convince victims to sign up to cryptocurrency investment websites and to part with their personal details such as credit card details and driving licences to open a trading account. The victim will then make an initial minimum deposit, after which the fraudster will call them to persuade them to invest again in order to achieve a greater profit.

In some cases, victims have realised that they have been defrauded, but only after the website has been deactivated and the suspects can no longer be contacted.

It says there are, however, ways that people can protect themselves from being scammed or conned.

It provides the following three tips to investors:

Don’t assume it’s real – professional-looking websites, adverts or social media posts don’t always mean that an investment opportunity is genuine. Criminals can use the names of well-known brands or individuals to make their scams appear legitimate.

Don’t be rushed or pressured into making a decision – a genuine bank or financial organisation won’t force you to part with your money on the spot. Always be wary if you’re pressured to invest quickly or promised returns that sound too good to be true.

Stay in control – avoid uninvited investment offers, especially those over cold calls. If you’re thinking about making an investment, get independent advice and thoroughly research the company first.

A cautious approach

You may have seen certain well-known, so-called property gurus extolling the virtues of cryptocurrency property investment to their followers on social media of late.

While there are legitimate ways of investing in property through cryptocurrencies, in particular bitcoin, it’s certainly not without its risks and potential downsides – so it’s important to be wary of anyone neglecting to mention these risks, and only selling you the idea of untold riches in a matter of weeks or even days.

As with the lure of property investment training courses promising near-instant financial freedom, the same rules apply to crypto property investment. If it sounds too good to be true, it probably is. And if you feel like you’re being pressure sold something, there is probably a reason for that.

Cryptocurrency traders are increasingly looking towards property investment as a means of growing their wealth, but as a property investor you may be tempted to consider something like bitcoin on its own as an alternative to a property portfolio.

The team at Property Hub have covered this in a podcast titled simply Bitcoin v Property, in which the two Robs discuss the pros and cons of the two options, and how bitcoin could potentially form part of an investment portfolio.

Like anything investment-based, due diligence, thorough research, trusting your gut instinct (if it feels wrong, there’s usually a good chance something is amiss) and seeking expert advice before parting with any of your money are all important defences against cryptocurrency investment fraud, in the same way they are the best protections against being conned by a dodgy property guru promising you the world.

You can read more about how the crypto-rich are increasingly turning to real estate investment here. As it increases, so too, inevitably, will the number of fraudsters looking to scam people, which means it’s more important than ever that property investors keep their wits about them.

Poll: Would you ever consider a cryptocurrency property investment scheme?



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