Scamwatch: cryptocurrency fraud

Beware the fraudsters pedalling fake digital currencies

Scamwatch: cryptocurrency fraud

Stay one step ahead of the fraudsters with our series of articles giving you the lowdown on the scams they use to trick people out of their hard-earned cash - and how to avoid being taken in by them.

This week, we explain how fraudsters are using the interest in digital, or crypto, currencies such as Bitcoin to con people out of money.

See also: The easy way to stop nuisance calls forever

See also: Why you shouldn't use public wi-fi for online banking

How does it work?

Cryptocurrencies are big news at the moment, with the value of the original digital currency Bitcoin jumping more than 200% this year.

Unfortunately, this cryptocurrency boom has given rise to a new type of fraud in which criminals pose as investment brokers offering people the opportunity to invest in new digital currencies, which then turn out not to exist.

Just this month, police in London had to step in to close a fraudulent cryptocurrency call centre that had been set up around the corner from the Bank of England.

"Victims were cold called by salespeople who allegedly persuaded them to invest in a cryptocurrency that does not exist and is therefore worthless," the police said.

The investigation came as a result of a number of victims reporting the fraud to the UK's consumer fraud and cyber crime watchdog Action Fraud.

Between them, these people alone lost an estimated £160,000. The overall amount stolen is therefore likely to run to hundreds of thousands of pounds.

How can I avoid being caught out?

The basic rule of thumb when it comes to investments is that if it seems too good to be true, it probably is.

So be wary of any investment offering very high returns, particularly if it comes to your attention due to a cold call.

It's also sensible to avoid any investments you don't really understand, even if they sound very lucrative.

Remember too that hard-sell tactics, such as claiming that you will miss out if you do not invest immediately, are often a sign of a fraudulent operation.

And don't be fooled by the company having an impressive address; being based in the City of London is no guarantee it is legitimate.

"Investment fraudsters employ aggressive sales tactics, which are often used to pressurise unsuspecting victims into parting with large sums of money," the police added.

"These people often base themselves in the City as they believe having an address in a prestigious financial district will help to legitimise their fraud."

I've been defrauded. What should I do?

You first move should be to break off all contact with the fraudsters (or "brokers") behind the scheme, and to report the scam to the police via Action Fraud (0300 123 2040).

Then alert your bank to protect your accounts and, where possible, stop any payments yet to be made.