Safety net: Crypto scams dupe thousands of Canadians, leaving them despondent and broke

It was a promising investment opportunity presented by a friend, promised in an ad on social media or suggested by a stranger on a dating app, but it turned into a nightmare for many Canadians.

Joel from Calgary sent $16,000 to what he thought was a brokerage firm based in England. Valerie from Scarborough invested $9,000 on the recommendation of a new love interest. Christopher, of Stratford, spent $10,000 on an investment that he would later say was “too good to be true.” Aleah, of Woodbridge, borrowed $75,000 from her mother’s line of credit and gave it to someone who said he would teach her how to trade an exciting new type of currency.

Their stories share a similar line. The lure of massive investment gains led them to entrust thousands of dollars to scammers who disappeared with their money, leaving them despondent, in debt and broke.

“I am in total shock and extremely angry at myself for being so naive and trusting,” wrote Valerie, the Scarborough woman who lost money to a scammer she met on a dating app. “All because I always see the good in people.”

But perhaps more common are schemes where Canadians are duped into spending their money on what they believe is a lucrative cryptocurrency, an investment in bitcoin or ethereum, which in reality does not exist at all.

Investment scams are old. Before crypto, most involved stocks: a call from a broker promising high returns and disappearing when the victim tried to withdraw his money. Today, as investors looking for quick wins turn to crypto, so have scammers.

“With the pandemic, many people tried to look for other ways to make money, and when the crypto world basically exploded in 2020, crypto scams also skyrocketed,” said Sorin Mihailovici, editor-in-chief of Scam-Detector.com. “This is the #1 type of fraud in the world.”

Mihailovici, who runs Scam-Detector out of Edmonton, originally intended the site to be the “Wikipedia of scams,” where users could flag suspicious behavior to each other. Now, however, he offers tools that determine whether a website is trustworthy and likely a front for scammers.

He sees first-hand the number of scammers competing for victims’ attention, and estimates that the crypto-fraud business is now worth billions.

The scams, which first started appearing in 2015, became more common as cryptocurrencies entered the mainstream, according to the Canadian Anti-Fraud Center (CAFC).

This is the #1 type of scam in the world

Sorin Mihailovici, Editor-in-Chief, Scam-Detector.com

Although the CAFC does not keep exact statistics for the amount of crypto fraud it sees, the center notes that most of the $164 million Canadians lost to investment fraud in 2021 was due to crypto fraud.

“Crypto fraud is massive,” said Jeff Horncastle, acting client and communications officer at the CAFC. “Unfortunately, it’s very easy to fall into one of the traps just because of the low amount of information people generally have about cryptocurrency.”

Horncastle said networks of organized criminals lurk behind these scams, and they can vary in complexity.

A popular iteration is the romance scam, also known as a “pig slaughter scam”, where fraudsters take to online dating sites to lure potential victims, gain their trust through weeks of conversations and finally convince them to put their money into a fake investment scheme.

It is a pattern that is repeated in other versions of the scheme. Each time, the lure of crypto investment gains is promised from a source trying to gain the victim’s trust.

Sometimes it is through a website designed to look like a legitimate trading platform. Horncastle said many of the top search engine results for cryptocurrency investments are actually scam platforms. Other times, scammers use compromised social media accounts to impersonate a victim’s friend or relative and encourage them to invest in crypto, which always promises massive returns.

The problem, besides the lure of quick cash, Mihailovici said, is the novelty of it all. Social media is filled with cryptohype accounts: self-proclaimed investment gurus who flaunt their own wealth in Lamborghinis and designer clothes and tout crypto as a surefire path to riches.

“It’s such a new industry, the problem is that the scammers take advantage of it because nobody is an expert,” Mihailovici said. niche.”

Canadian police have issued warnings about the growing number of crypto-related scams. Ontario Provincial Police said in 2021 they saw a “steady increase in reports of fraud related to cryptocurrency investment.” The RCMP in March asked Canadians to “do their research” before investing in crypto.

But arrests are rare. Fraudsters can operate abroad, hide their identity and the cryptocurrency itself is transferred without an intermediary. There are no banks or bank transfers required.

“It’s so hard to catch the scammers,” Mihailovici said. “The actual authorities, the police, can’t even track all the fraud.”

Horncastle said victims should report the scam to their local police and to the CAFC. But otherwise the victims have few recourse options and little chance of getting the money back.

A completely separate network of fraudsters is waiting for those who have already fallen for the scam. Known as recovery scammers, they promise that for a fee they can recover your lost funds.

But they promise the impossible, according to Mihailovici. For now, the fraudsters can operate with apparent impunity.

“There is no recovery company that can say 100 percent, not only that they are able to recover, but also to find the fraudsters,” he said, “and it’s going to be that way for a while.”