This week, the Financial Services and Market Authority (FSMA) the regulator in Belgium, made a rather troubling discovery. It was reported by the regulator that cryptocurrency fraud had cost the entire country approximately €10 million, which is no small number. According to the financial regulator, this fraud occurred during the period starting from May 2019 to September 2020. The question is how these cryptocurrency criminals have managed to conduct so much fraud. The regulator revealed the tactics that are usually adopted by these crypto scammers and robbers. The tactics that were disclosed were quite aggressive and involved trying and persuading the victims to make even more investments.
Consequently, these involved coercing victims into making payments through remote computer control. Apart from this, the FSMA also said that fake advertisements are typically created by these scammers, which are known for using the pictures of celebrities and influencers, without their knowledge. The purpose of using their images is to lull their victims into a false sense of security because they are made to believe these celebrities approve of them and such advertisements can typically be found on various social media networks. When victims end up clicking on these advertisements, they receive a call from these scammers for discussing a fraudulent investment offer.
Not only do these fraudulent investors use cryptocurrencies, such as Bitcoin, but they have also expanded to other investment scams. These include forex products and contract for difference (CFDs). It is possible to trade these products in the financial markets with shares and commodities. Warnings had already been issued by the FSMA back in 2018, regarding the potential for fraud and scams within the crypto industry. Since then, the regulator had also issued warnings about fake credit letters to the long list of criminal offerings. As far as this fraud is concerned, the regulator highlighted that malicious parties steal money from people by offering them favorable loans.
Further warnings were also issued by the FSMA regarding wealth management scams and fraudulent alternative investments. The huge number of scams in the crypto space is one of the top reasons why the Financial Conduct Authority (FCA), the regulator in the United Kingdom, has imposed a ban on the sale, marketing and distribution of crypto derivatives and ETNs for retail investors. This ban will come into effect from January 6th, 2021. The financial watchdog in the UK also cited other reasons for the ban, including the ‘lack of inherent value’ that has been cited by all major regulators, and also the more justified risk of extreme price volatility.
Apart from this, the UK regulator also added that most people don’t really have a proper understanding of the cryptosystems. It appears that considering the level of money that was flowing through the cryptocurrency market, these frauds and scams were inevitable. Therefore, watchdogs and regulators are taking steps for regulating the use of crypto in such a manner that people can make profitable trades and those not well-versed in crypto can steer clear of them.