A leading European regulator has updated its list of suspected cryptocurrency fraud schemes, meaning the list now contains almost one hundred potential scams.
The FSMA, or Financial Services and Markets Authority, is responsible for monitoring the financial markets in Belgium as well as promoting transparency and protecting consumers.
Its latest round of list updates ranges across a variety of scam types. It warns against fraud which could create an illusion of legitimacy by persisting for several months, for example, while it also addresses the role of technology in bolstering these illusions.
In a statement, the FSMA pointed out some of the pitfalls associated with crypto scams, including the difficulties around identifying whether or not a trader has fallen victim given the complex nature of the crime and the tools scammers have at their disposal.
“Generally speaking, it is hard to tell that one has been the victim of investment fraud”, it said.
“Often for several months, the swindlers manage to maintain the illusion that this is an entirely legitimate and highly profitable investment, thereby encouraging their victims to invest even more.”
“They do not hesitate to employ various particularly effective techniques to this end. Their websites look very professional: they provide you with a personal space where you can track changes in the value of your investment via well-designed tables and graphs.”
“All these promises are worthless, however: if an offer is fraudulent, the promises that accompany it are equally so”, it added.
The FSMA keeps its list actively updated. It regularly leads the way on pointing out potentially fraudulent schemes and advises traders on how to defend themselves against any problems if they’re planning to make an investment.
Just last month, for example, it said it advised “against responding to any offers of financial services” from certain firms.
It also pointed out that there are no firms in Belgium which were permitted to “distribute actively, within the territory of Belgium, binary options, certain forex products or CFDs”.
CFDs, or contracts for difference, are derivative-based investment instruments which mimic the underlying markets. Foreign exchange and cryptocurrency CFDs are available.
In addition to pointing out the behaviours of potentially fraudulent cryptocurrency investment vehicles, it also offers more general advice designed to protect consumers from problems. It advised, for example, that traders actively research the companies they plan to use before they make the decision to invest.
“If the company cannot be clearly identified, it should not be trusted”, the regulator says.
“Use common search engines (like Google) to gather information about the company.”
It also encouraged traders to ensure that they have a strong understanding of the company in which they plan to invest before they go ahead.
Traders should “ask the other person for clear and understandable information”, it said.
“Never invest in a product if you do not fully understand what is being offered.”
“Beware of (promises of) winnings out of all proportion. When a yield seems too good to be true, it is indeed often unreal”, it added.