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Scam epidemic: Social media crypto fraud on the rise

Scam epidemic: Social media crypto fraud on the rise
Emma Lunn
Written By:
Emma Lunn

Lloyds Bank has issued an urgent warning over the rising threat of cryptocurrency scams originating on social media.

The bank said that crypto scams have surged by 23% this year as fraudsters target younger investors. Those who fall victim lose £10,741 on average, more than any other type of scam.

Social media scammers

Lloyds’s analysis found that 66% of all investment scams start on social media – with Instagram and Facebook the most common sources. The scams include a mix of bogus ads, fake celebrity endorsements, and targeting through direct messages.

The criminal gangs behind the scams are constantly evolving their tactics to exploit new trends, and to trick more victims into parting with their cash. Many young investors are tempted by the supposed ‘get rich quick’ promise of cryptocurrency trading, with scam victims aged 25 to 34-years-old making up a quarter of cases.

Lloyds Bank research suggests would-be crypto investors typically make an average of three payments before they realise they have been scammed, taking around 100 days from the date of the first transaction before they report it to their bank. By this point, the money is usually long gone, and impossible for the bank to reclaim.

Lloyds identified app-bank Revolut as the most common recipient of Faster Payments made by crypto investment scam victims, although the funds are often then sent on elsewhere.

How to spot a crypto scam

Fraudsters often go to great lengths to convince investors that they are the real deal. This can include setting up fake companies, social media profiles and websites to clone real firms. They may even produce investment literature that looks professional.

In some cases, the fraudster will pose as an ‘investment manager’, promising that any payments made by the victim will be invested on their behalf, often with the promise of huge returns.

Sometimes the victim will be shown a fake investment account, suggesting that the funds are already making a profit, or a small amount of money will be transferred back into their bank account.

However, both tricks are just a way of duping the victim into thinking the investment is real and encouraging them to part with even more money. There is no investment account, no genuine crypto holding, and once the fraudster has taken as much money as they can, they will simply disappear.

In other cases there will be an actual investment account held in the victim’s own name and registered with a legitimate platform, such as Coinbase or Binance.

Either the victim will be shown how to set this up, or it will be opened on their behalf, as many trading platforms carry out limited checks when opening new accounts.

Once funds have been deposited, victims may be tricked into handing over their account login details, or passing control of their digital wallet over to the fraudster. They might also be directed to transfer cryptocurrency from within their own account to another digital wallet, which is under the control of the fraudster.

Crypto payments and other types of scam

Cryptocurrency payments can also form part of other types of scam, such as romance scams or impersonation scams. If someone asks for a payment using cryptocurrency, that should immediately set alarm bells ringing.

Liz Ziegler, Lloyds Bank fraud prevention director, said: “Investing can be a great way to make money, but you need to make sure your money is going to a trusted, genuine company. Crypto is a highly risky asset class and remains largely unregulated, which makes it an attractive area for fraudsters to exploit. If something goes wrong, you’re unlikely to get your money back.

“Predictably, social media platforms are the main breeding ground for this type of scam, with a mix of bogus ads, fake endorsements and cloned accounts being key to fraudsters’ methods. It’s time these tech firms took responsibility for protecting their customers, stopping scams at source and contributing to refunds when their platforms are used to defraud innocent victims.”

How to stay safe from crypto investment scams

  • Beware of crypto investment ads on social media
  • Check any firm you deal with is genuine by checking contact details on the FCA website
  • Check for investment warnings (these are required by law) and be wary of free gifts and refer a friend bonuses
  • Never share the login details for your investment account or your private cryptocurrency keys with anyone else
  • Be wary of any organisation that asks you to pay by bank transfer, rather than card