As the Better Business Bureau announced this week, scams related to the digital currency industry accounted for a significant amount of loss for Canadians in 2017. According to the bureau, over $1.17 million CAD was stolen from Canadians throughout the year, reigniting discussions about how investors can protect themselves from prevalent schemes. Now, the bureau is encouraging Canadians to report projects they believe may be scams.

Further, the accompanying press release stated that it believes only 5% of victims generally come forward to report losses, meaning that the actual figure may be significantly higher than the amount currently reported.

As the Better Business Bureau emphasized, overcoming the risk of being scammed is dependant on staying informed. In the case of digital currency scams, this is reliant on understanding the difference between genuine projects and fraudulent attempts.

The industry’s popularity tempts scammers

Digital currency scams were listed as the country’s 5th most prevalent type of scam in the Better Business Bureau’s “Canadian National Top 10 Scams of 2017” list. This marks the industry’s first inclusion in the bureau’s annual top 10 advisory.

The rising popularity of digital currencies contextualizes the industry earning its first feature on the bureau’s top 10 list. This is largely due to the fact that opportunists bank on the success of digital currencies in order to trick investors and profit from consumer confusion.

“Cryptocurrencies are speculative, high-risk investments that are mostly unregulated,” the bureau stated. “As they have captured the attention of investors, so too have fraudsters taken notice. There is an elevated risk of fraud and manipulation.”

As a result, fraudulent Initial Coin Offerings (ICOs) and digital currency schemes could be seen as detrimental to the reputation of honest actors that exist within the industry. This is evidenced by Facebook’s sweeping policy update which banned all digital currency ads from its network, at the expense of genuine projects.

This trend is also observed when considering the legal and regulatory action taken against “lending” platforms like BitConnect and DavorCoin. Many digital currency advocates celebrated the closure of both platforms’ lending services, believing them to be Ponzi schemes that hurt the industry’s reputation through promises that were “too good to be true.”

How investors can protect themselves

Even with many honest actors in the space, as with any industry, there will always be scammers looking to take advantage. To prevent yourself from falling victim, stay up-to-date on recent trends and avoid temptation from projects that over-promise.

Recently, Coinsquare Discover reported on the prominence of fake digital currency websites, which appear identical to real exchanges in order to defraud investors and phish users’ account information.

Further, a scheme currently prominent on Twitter involves fake accounts pretending to be notable digital currency figures in an attempt to deceive users for profit.

Digital currency investors should also be on the lookout for pump-and-dump schemes, according to a recent warning from the U.S. Commodity Futures Trading Commission. In order to avoid falling victim to these schemes, regulators advise to only invest in currencies that are “thoroughly researched.” Additionally, investors are warned to proceed with skepticism when viewing online ads and news that comes from a single or unverifiable source.

“Staying informed and on top of the numerous ways scammers try and get your money is key to making sure you don’t fall victim,” said Danielle Primrose, CEO and president of the Better Business Bureau for Mainland BC. “That’s why we do this every year. Recognize it, report it, stop it.”

 

Image credit: BBB logo

 

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