In 2024, funding scams conned Canadians out of greater than $310 million, and “nicely over 50%” of the reported losses have been associated to cryptocurrency investments, the Canadian Anti-Fraud Centre (CAFC) informed MoneySense. Crypto investments are the highest sort of funding scams reported to the CAFC. It’s estimated that fewer than 5% of scams are reported, so the precise losses are seemingly a lot greater.

Scammers typically discover victims on social media

Cryptocurrency scams are sometimes intertwined with other types of scams—and the criminals behind them solid a large web. Con artists regularly discover potential marks on social media. In response to an analysis by TradingPlatforms based mostly on FTC knowledge, practically one-third of social media crypto fraud occurs on Instagram, and one-quarter on Fb. 

Some ruses begin out as romance scams. As soon as suspects achieve a sufferer’s belief and affection, they current an “funding alternative” or request crypto or cash to pay for a made-up expense, comparable to medical payments.

Crypto funding scams typically start as relationship and romance frauds, notes Jeff Horncastle, the shopper and communications outreach officer on the CAFC. Fraudsters develop a relationship with their goal and achieve their belief. Then they persuade the goal to spend money on a fraudulent crypto platform—even teaching them on easy methods to do it—and promise massive returns. Initially, the goal would possibly even money out their income. Fooled into pondering the platform is official, they make investments a bigger sum of money. After they attempt to withdraw their funds, nevertheless, they uncover they will’t, and their love curiosity has seemingly vanished, too.

10 varieties of crypto scams

There are various varieties of scams to be careful for, and sadly, as buyers get savvier, the cons evolve and change into trickier to identify. To guard your self, all the time know the place your cash goes, perceive the crypto advertising rules in Canada, and solely use trusted and compliant crypto buying and selling service suppliers. (As a place to begin, see MoneySense’s picks for the top crypto platforms in Canada, all of which securities regulators have authorised to do enterprise on this nation.) An exhaustive record of crypto scams is probably going inconceivable, however to guard your self, listed below are 10 to be careful for.

1. Pump-and-dump, or rug pull

In a “pump and dump” or “rug pull” scheme, promoters of a cryptocurrency hype it as much as increase demand, and when the worth soars, they promote all their cash for a fast revenue. As a result of they promote in massive volumes, different buyers get nervous and promote their cash, too. As panic units in and the promoting spreads, the coin’s worth plunges. The promoters get wealthy and small buyers are left “holding the bag,” confronted with big losses. 

A infamous instance of an alleged crypto pump-and-dump scheme is a coin referred to as Squid Game. Launched in October 2021, it rode the recognition of the Netflix sequence of the identical identify—regardless of having no affiliation. Lower than two weeks later, Squid Recreation’s crypto builders all of the sudden offered their holdings when the coin’s worth hit $2,800, making themselves $3.3 million richer (all figures in U.S. foreign money). Right this moment, one Squid coin is price about a tenth of a penny.

The pump-and-dump rip-off is just not distinctive to crypto, in fact. It’s what high-flying stockbroker Jordan Belfort—the topic of the Hollywood movie The Wolf of Wall Avenue, starring Leonardo DiCaprio—engaged in through the Nineteen Nineties. His agency was accused of artificially inflating the worth of penny shares earlier than promoting their shares to make a number of quick cash—costing buyers as much as $200 million. Within the early 2000s, Belfort served 22 months in federal jail for securities fraud. He’s now advertising and marketing himself as an investment guru.