FCA Warns U.K. Investors of Elaborate Cryptocurrency Scams Involving Prestigious London Addresses
The U.K. Financial Conduct Authority (FCA) has warned local investors to be wary of elaborate cryptocurrency scams, some of which claim prestigious physical addresses in London.
Details of the Cryptocurrency Schemes
In an official release by the FCA on Friday (August 17, 2018), the financial watchdog describes several ways fraudulent cryptocurrency schemes are carried out. One of the methods includes the use of social media platforms.
Crypto fraudsters use the images of celebrities or well-known individuals to advertise on social media to promote crypto investments. The ads then link to slick-looking websites where users are coaxed into making investments with the firm using digital or traditional currencies. Most times, these fraudulent firms are based outside the U.K.; however, some claim to be based out of prestigious London addresses in order to lure investors.
The financial regulatory body further said,
“Scam firms can manipulate software to distort prices and investment returns. They may scam people into buying non-existent cryptocurrencies. They are also known to suddenly close consumers’ online accounts and refuse to transfer the funds to them or ask for more money before the funds can be transferred.”
The FCA’s hands are tied, as cryptocurrencies are not regulated in the U.K. presently. This means that crypto trading and digital currency exchanges fall outside its regulatory remit. But firms that sell regulated investments with an underlying cryptocurrency element may need to seek authorization from the FCA. The regulatory body has formerly warned consumers on the risks of investing in cryptocurrency Contracts For Difference (CFDs) and ICOs.
FCA Issues Guidelines for Cryptocurrency Investment Safety
The FCA has warned U.K. citizens to be wary of advertisements that appear online and on social media. These adverts make dubious promises of high returns on cryptocurrency investments or cryptocurrency-related products. The regulatory body is also advising consumers to conduct thorough research on the products advertised and the firms behind them. Most firms aren’t authorized by the FCA, and consumers investing in these firms do so at their own risk.
According to the FCA, the government body does not regulate digital currencies, but they do regulate certain cryptocurrency derivatives. These include futures contracts, CFDs and options. Any firm selling or advertising these products in the U.K. must be registered with the FCA. The names of such firms and their directors should be checked online, and consumers should be wary when they are presented with “juicy offers.”
The regulatory body reiterated that cryptocurrencies and consumers’ investments in them are unprotected by the UK’s Financial Services Compensation Scheme. The body, however, asked affected investors to contact it through a consumer helpline or the reporting form.
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