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Competition watchdog warns on crypto scams

By Fergus Halliday
 — 1 minute read

A new report from the Australian Competition and Consumer Commission (ACCC) has revealed the extent to which consumers are falling for scams related to the burgeoning asset class of cryptocurrency.

As the number of cryptocurrencies competing for the attention of would-be investors has exploded, so has the number of crypto scams.

In a recent report published by the ACCC, almost a quarter of reported investment scams involved a cryptocurrency.

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“The perceived anonymity of unregulated cryptocurrencies can impede the ability to recover funds or identify scammers. It is likely that we will see increased use of bitcoin and other cryptocurrencies in the years to come,” the report said.

Speaking to InvestorDaily sister brand nestegg, NortonLifeLock’s Mark Gorrie said that common crypto scams can range from fake ICOs (initial coin offerings) and phishing attacks to pyramid schemes.

“We have seen a range of crypto scams circulated over the years, as recent as the DubaiCoin scam, which was a phishing attack that circulated just this year. There are simple things that we can all be looking out for when investing into crypto to ensure we aren’t falling victim to these hidden crypto scams,” he said.

The first of these involves a little bit of attention to detail. Like their non-blockchain-based counterparts, Mr Gorrie said that many cryptocurrency scams can be identified by simply taking a closer look at the fine print involved. 

“Scammers will often make typos, leave out details and, if you ensure to inspect with a close eye, they can be easy to identify. If it seems sloppy and unlike a legitimate business, it’s best to stay away,” he said.

Mr Gorrie said that white papers are a good litmus test here. 

“When investing in a cryptocurrency, investors should review the white paper in detail. The white paper is the foundational document for cryptocurrencies and contains all the details of that specific cryptocurrency and the company as a whole,” he said.

“Within the white paper is where you will be able to find any warning signs of a scam. Read and analyse the document and look out for typos and mistakes, or general lack of clarity. Definitely stay away from cryptocurrencies that don’t have any white paper at all.”

Last but not least, Mr Gorrie warned crypto investors with a familiar phrase: if it seems too good to be true, it probably is.

“While the ‘high return, no risk’ offer can be very tempting, investors should be wary of this type of cryptocurrency. Watch out for the promise of constant returns or promise of high yields. Cryptocurrency is unregulated and volatile. This makes it unlikely to be able to promise these things,” he said.

 

The ifa Excellence Awards are back in 2021 and nominations are now open! This prestigious accolade recognises exceptional professionals within the financial advice industry, shining a light on the outstanding achievements from the nation's best and brightest. If this sounds like you or someone you know, then nominate today for the ifa Excellence Awards 2021!

 

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