A major European regulator has warned traders and investors to watch out for a specific type of “clone fraud” which it says is rising in prevalence.
The FSMA, which is based in Belgium, said that it was seeing an increasing number of cases of the problem – and that crypto was particularly vulnerable.
It said that the main tactic of the scammers was to fraudulently claim that they had the relevant permissions to operate.
To do so, they usually pose as an actual, regulated company by taking its identity in some way, or “cloning” it.
“In order to convince you to take them upon (sp) their offer of investments, the fraudsters lead you to believe that they are acting on behalf of firms that have the necessary authorisation to offer such services and that are registered with the FSMA or another authority”, said the FSMA in a statement posted on its website.
“To this end, they usurp the names and other legal information of regulated providers and refer consumers, for example, to the official website of the FSMA to try to convince them that they are indeed authorised firms.
“Consumers are thus deceived, thinking they are dealing with a regulated entity, whereas the latter’s identity has simply been stolen”, it added.
While the regulator makes it clear that this sort of practice can occur anywhere in the investment sphere, it claims that the risk is particularly high in the cryptocurrencies field.
“The FSMA invites you to be particularly wary of fraud involving cryptocurrencies, where this practice seems extremely widespread”, it said in its statement.
It pointed out that a common hallmark of crypto fraud – claims that very high potential gains are available – was often in place in this type of scam too.
“The FSMA recently issued a warning against a significant number of such platforms that offer ‘miracle’ investments in cryptocurrencies that appear very simple and lucrative, but that are in fact scams (see our most recent press release dated 26 October 2018).
“It seems that a substantial number of these websites have stolen the identity of companies authorized to offer financial services in Belgium, referring to their authorization on the website of the FSMA (see the register of financial firms by the ACPR – REGAFI)”, it added.
The statement from the FSMA included a testimonial from a consumer who had considered opening an account on one such clone site.
The alleged scammer which spoke to this customer appears to have used official, authoritative sources to gain legitimacy for their allegedly cloned firm.
“The first thing they say when you contact them from Belgium is to type the company’s name into your search engine”, the consumer said.
“To gain my trust and prove their good faith, [the contact person] invited me to go to the French website managed by the Banque de France which comprises a register of financial firms operating on French territory (www.regafi.fr).”
The FSMA advises anyone who is uncertain about the people they are speaking to in relation to their investments to go to the FSMA’s website and use the consumer contact form.