What has happened?
The Financial Conduct Authority (FCA) has warned the public about investment scams carried out through bogus trading, after the number of reported cryptoassets and forex investment scams more than tripled last year to over 1,800.
What does this mean?
Using figures from Action Fraud, the national fraud reporting service, the FCA has announced that victims lost more than £27 million in total to crypto and forex investment scams in 2018-19.
The number of claims increased from 530 to 1,834 in 2018-19 financial year, with most of the reported cases involving cryptoassets scams, the regulator said.
However, total losses fell from £38 million to £27 million and average losses also came down, from £59,600 to £14,600, in the 2018-19 financial year.
The watchdog said that fraudsters use social media to promote their "get rich quick" schemes, often using fake celebrity endorsements and images of luxury items such as expensive watches and cars.
Victims are then redirected to professional-looking websites where they are persuaded to invest.
Investors will often be led to believe that their first investment has made a profit.
The fraudster will then contact the victim to invest more money or introduce friends and family with the false promise of greater profits.
However, eventually the returns stop, the customer account is closed and the scammer disappears without further contact.
Mark Steward, the FCA's Executive Director of Enforcement and Market Oversight, warned the public to be suspicious of adverts that promise high returns from online trading platforms.
"Scammers can be very convincing so always do your own research into any firm you are considering investing with, to make sure that they are the real deal. Before investing online find out how to protect yourself from scams by visiting the ScamSmart website, and if in any doubt – don’t invest."
Pauline Smith, Director of Action Fraud, said:
"These figures are startling and provide a stark warning that people need to be wary of fake investments on online trading platforms. It’s vital that people carry out the necessary checks to ensure that an investment they’re considering is legitimate."
The FCA has warned several times already about illegal cryptocurrency firms and online investment fraud involving cryptocurrencies.
As a member of the Cryptoassets Taskforce along with HM Treasury and the Bank of England, the FCA is looking at introducing regulatory guidelines for the crypto sector.
In January this year, it issued a consultation that, once finalised, will outline the cryptoassets activities it regulates.
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