Hong Kong police reported that cryptocurrency investment scams increased dramatically during the first half of this year, with one victim losing up to HK$15 million according to police statistics. A total of 1,503 cases involving cryptocurrency investing saw 69% more losses incurred than at this point last year; most cases involved cryptocurrency exchanges (603) while SFC has encouraged residents to be wary of investing and ensure any exchange they use is licensed before proceeding with investment schemes involving digital coins or tokens.
The SFC has issued warnings about fraudulent crypto platforms that utilize false websites or mobile applications to defraud investors into sending funds into an external cryptocurrency wallet controlled by fraudsters, making it hard for victims to dispute transactions in court or seek legal aid; additionally, since such scams often use instant messaging applications like WhatsApp to contact victims directly, Hong Kong police often struggle to track down these perpetrators.
Hounax was responsible for scamming a woman out of nearly $2.2 million through a dubious cryptocurrency trading platform claiming to be legitimate cryptocurrency exchange with financial institution cooperation, yet which actually had questionable business models and was operating illegally as an exchange platform, according to SFC investigations.
As opposed to traditional online banking, cryptocurrency transactions take place within blockchain-based wallets that make the transactions immutable and nearly impossible to fake or manipulate. Furthermore, cryptocurrency industry spans borders; therefore its laws vary across nations and local authorities may find it challenging to identify fraudulent crypto transactions.
The SFC has issued a warning about cryptocurrencies being riskier than stock investments and encourages people to conduct thorough research before engaging in any investment opportunity. They advise conducting a small withdrawal test before investing any further to see if their money can be retrieved back. In addition, there is now an SFC-created tool which helps users verify the legitimacy of crypto exchanges by entering their web addresses, phone numbers, email addresses and platform usernames into an authenticator tool.
Scams targeting cryptocurrency investors in the US are on the rise. By 2022, cryptocurrency scams made up approximately 13% of cybercrimes reported to law enforcement agencies. Scams included bait-and-switch schemes, pyramid selling schemes and crypto blackmail schemes in which scammers threatened to publish embarrassing or embarrassing information about victims unless payment in cryptocurrency could be received immediately.
People in the US lost over $50 million to cryptocurrency scams during the first half of 2018, more than any other type of online fraud. Many of these schemes target those unfamiliar with cryptocurrencies who don’t understand their mechanics.