18th May 2018

Crypto fraudsters fake celeb backing

Action Fraud is warning the public about the growing problem of criminals using the reputation of prominent people in cryptocurrency scams.

By Aaran Fronda
Freelance writer for JTS
According to the Financial Conduct Authority young people are more likely to fall prey to social media led investment scams than the over 55s

Using celebrities to pull in more customers is nothing new. The advertising method dates as far back as the 1760s when Stoke-on-Trent-based pottery producers Josiah Wedgwood and Sons (known now as Wedgwood) were appointed ‘potter to Her Majesty’. The company has used its royal endorsement to imbue its products with a sense of prestige, especially to buyers abroad, with the business continuing to use their ties to the crown that they secured in the 18th century to this day.

Nowadays, big-time social media influencers – those with over 100m followers on Instagram – are paid hundreds of thousands of pounds by the likes of Nike and L’Oreal for a single post plugging the latest products all in a bid to boost sales. But the profound power of celebrity endorsements that compels consumers to part with their hard earned cash has recently been employed by fraudsters who have begun using the reputations of prominent people to advertise investment scams online and over social media.

A number of fraudulent websites offering investments in binary options, contracts for difference (CFDs), forex and even cryptocurrencies like Bitcoin are using images and fabricating recommendations from well-known business gurus like Deborah Meaden from the BBC’s Dragons’ Den and founder of MoneySavingExpert.com Martin Lewis without their consent.

“I find it sickening that these people are leeching off the trust I’ve spent years building in order to target vulnerable people and attempt to steal their money,” Lewis said. “Let me be very plain. I never do adverts. If you see my picture in an advert on Facebook or anywhere else recommending products – be it Bitcoin, binary trading, PPI firms or anything else – they are nothing to do with me. Be very, very careful.”

Social media
The adverts which be found scattered across social media platforms like Facebook, Instagram and Twitter use a mix of celebrity images and fake quotes that promise high returns in the hopes of attracting innocent people to invest in scams. After investing the hosts of these fradulent sites will then lock investors access to fund via a myriad of unsavoury techniques: applying ludicrous payout clauses, shutting down users accounts entirely or simply refusing to return investors’ funds.

The true scale of the problem was made clear after Action Fraud data revealed that investors were swindled out of £87,410 per day as a result of binary options scams. In March alone, the same organisation received 21 reports from victims of this kind of investment fraud who had suffered combined losses of more than £34,000.

“Opportunistic fraudsters are taking advantage of this market, offering investments in cryptocurrencies and doing everything they can to defraud unsuspecting victims,” Director of Action Fraud, Pauline Smith, said.“Anyone who invests in cryptocurrencies should thoroughly research the company they are choosing to invest with.”

When most people envisage the types of individuals most at risk from fraudsters online they tend to picture an older victim lost at their laptop, but it is actually tech-savvy youngsters that are most at risk. According to the Financial Conduct Authority (FCA) young people (under 25s) are more likely to fall prey to these types of social media led investment scams. In fact, this demographic is six times more likely to trust investment adverts they view on social media platforms, compared to over 55s, according to a study conducted by the regulator.

FCA response
In an effort to combat this type of fraud and protect consumers the FCA regulated binary options on January 3 2018. The new rules aim to ensure that all firms operating in the market must gain authorisation from the UK regulator. As part of of this process the FCA also made a list of 94 unauthorised investment firms offering binary options trading illegally to UK consumers, so those that are interested in investing in this market can do so safely and securely.

“As people have become more sceptical of investment-related cold calls and consumer habits have changed, we have seen investment fraud moving online and to social media,” Mark Steward, Director of Enforcement at the FCA said. “While their websites and profiles appear to be professional, they are all too often run by fraudsters who fix prices and pay-outs, or in some instances don’t really place trades at all, before disappearing with innocent investors’ money.”

“Before investing online, check you know who you are really dealing with and check if they are authorised by the FCA,” he added.

Consumer watchdogs urge consumers to stay vigilant and not take websites, adverts or social media posts no matter what celebrity endorses them or how professional they may appear as an indication that the proposed investment opportunity is genuine.

Comments are closed.