Crypto Fraud Schemes

Red Flags to Watch For

• Unsolicited messages from strangers on social media, dating apps/websites, or text messages, often leading to prolonged exchanges on private messaging apps.

• Promises of easy money in the crypto market, often citing “exclusive information” or “professional traders.”

• Encouragement to visit crypto-related websites offering “investment packages” or “guaranteed rates of return.”

• Provision of financial records showing returns or allowing a small withdrawal to create a false sense of legitimacy.

How to Protect Yourself

• Be cautious of unsolicited messages, especially if the sender tries to build a personal relationship.

• Avoid investing based solely on advice from someone met online. Consult a registered financial professional if needed.

• Be skeptical of any online connection suggesting crypto investments or fund transfers.

• Question promises of large, quick, or low-risk returns.

• Report suspected investment fraud to:

  • Canadian Anti-Fraud Centre (CAFC): 1-800-495-8501

  • Canadian Investment Regulatory Organization (CIRO): 416-943-4640

  • Local police or regulatory authorities

• Stay informed by visiting the CAFC and CIRO websites regularly.

• If victimized, immediately contact your bank, local police, provincial or territorial securities commission, and CAFC.

Note:

• CAFC: Central agency in Canada that collects information on fraud and identity theft, managed by the RCMP, Competition Bureau Canada, and Ontario Provincial Police.

• CIRO: Regulates investment dealers and mutual fund dealers in Canada.

Fraud Facts

• Investment fraud losses in 2023 totaled $309.4 million.

• Social media losses reported to the CAFC in 2023 totaled $172 million.

• Romance and investment scam perpetrators are often part of criminal gangs operating outside Canada, causing individual losses exceeding $1 million.

Common Crypto Scams

• Pig Butchering: Fraudsters develop relationships via social media or dating apps, gain trust, and persuade victims to invest in fake crypto platforms, often preventing withdrawals.

• Pump and Dump: Coordinated attacks inflate an asset’s price using false hype. Fraudsters sell at the peak, leaving unsuspecting investors with devalued assets.

• Advanced Fee Scam: Scammers request upfront payments for promised services or returns.

• AI Investment Scam: Promises high returns via “proprietary” AI systems or automated trading bots.

• Asset Recovery Scam: Third parties demand a fee to “recover” funds lost in prior scams.

• Bait and Switch Scam: Victims are misled with attractive offers that are replaced with inferior products or services.

• Bitcoin Mining Scam: Fraudulent investment opportunities in crypto mining infrastructure.

• Crypto Blackmail Scam: Threats using personal information, demanding crypto payments.

• Crypto Gaming Scam: Fake gaming apps trick users into depositing crypto, which is then stolen.

• Crypto Job Scam: Impersonated recruiters offer fake jobs to steal crypto or personal data.

• Crypto Wallet Drainer Attack: Malware drains victims’ crypto wallets through malicious websites.

• Fraudulent Trading Platforms: Fake websites simulate investment opportunities and artificially inflate returns.

• Hacking: Unauthorized access to steal personal or financial information.

• High-Yield Investment Programs (HYIP)/Ponzi Schemes: Promise high returns through recruitment, often promoted via social media.

How to Spot a Pump and Dump Crypto Scam

1. Sudden price spikes without fundamental reasons (announcements, development, partnerships).

2. Unverified hype, grandiose claims, or promises of guaranteed returns.

3. Low trading volume cryptocurrencies suddenly seeing major investments.

4. Groups or communities promoting specific cryptocurrencies in coordinated campaigns.

5. Individuals claiming insider information about a cryptocurrency’s price.

6. High-pressure tactics like fear of missing out (FOMO) or promises of quick profits.

7. Lack of transparency about promoters, project fundamentals, or motives.

8. Sudden price spikes followed by rapid declines.

How to Avoid Pump and Dump Scams

• Do Your Own Research: Investigate whitepapers, team members, technology, roadmaps, and community support.

• Be Skeptical of Hype: Avoid investments promising guaranteed returns or exaggerated claims.

• Verify Information: Check multiple credible sources; don’t rely solely on social media or forums.

• Understand Market Dynamics: Recognize signs of pump and dump schemes.

• Avoid High-Pressure Tactics: Take time to assess opportunities calmly.

• Use Trusted Platforms: Trade on reputable, regulated exchanges with strong security.

• Seek Professional Advice: Consult financial advisors experienced with cryptocurrencies.

How AI Helps Detect Pump and Dump Scams

• Real-Time Monitoring: Analyzes large volumes of trading data to detect unusual activity.

• Network Analysis: Tracks transactions and connections to uncover coordinated schemes.

• Anomaly Detection: Identifies deviations from normal trading patterns, abnormal price movements, and sudden liquidity changes.

• Adaptive Learning: AI systems update detection models based on new data and feedback for improved accuracy.

Information Sources:

• Canadian Anti-Fraud Centre

• Canadian Investment Regulatory Organization

• Datavisor.com, 651 Bannon St #300, Sacramento, CA 95811