Canada regulator warns of rise of FX and Crypto scams
Investment fraud is prevalent and increasingly sophisticated, affecting investors across the country. It’s more crucial than ever for people to safeguard their financial interests by learning more about current scams, and verifying sources of investment information.”
It’s Fraud Prevention Month and the Canadian Securities Administrators (CSA), Canada’s financial watchdog, is warning Canadians to stay vigilant against the rise in investment fraud.
The CSA, led by Stan Magidson, Chair and CEO of the Alberta Securities Commission, warned of the sophistication and prevalence of investment scams affecting people nationwide.
Social media and apps magnify the risk of scams
The rise of social media, apps, and websites as primary sources of investment advice has introduced risks from unqualified or ill-intentioned advisors.
Common scam tactics include promises of guaranteed or high profits, urgent actions with minimal risk, unauthorized access to electronic devices, and false promises of loss recovery.
To safeguard financial interests, Canadians are urged to:
- Verify the credibility of information sources and avoid relying solely on online content or influencers for investment advice.
- Engage with registered professionals and firms for securities trading or advising, utilizing the CSA’s National Registration Search to confirm credentials.
- For those interested in crypto investments, use only crypto trading platforms registered with Canadian securities regulators, acknowledging the high risks associated with crypto investments.
To further educate the public, the CSA re-launched its “Human Disclaimers” campaign, featuring videos that debunk common “get rich quick” schemes and promote due diligence in investing.
Stan Magidson, CSA Chair and Chair and CEO of the Alberta Securities Commission, said: “Investment fraud is prevalent and increasingly sophisticated, affecting investors across the country. It’s more crucial than ever for people to safeguard their financial interests by learning more about current scams, and verifying sources of investment information.”
‘Pig Butchering’ scams on John Oliver’s “Last Week Tonight”
John Oliver’s “Last Week Tonight” segment in late February spotlighted the increasing issue of financial scams, particularly focusing on a scam known as “pig butchering.” This scam involves tricking individuals into believing they are investing in legitimate opportunities, only to defraud them of significant amounts of money.
Oliver’s critique highlighted how scammers have exploited platforms like MetaTrader 5 to create plausible-looking trading environments that deceive victims into thinking their investments are growing. Despite MetaTrader itself not being fraudulent, its use by criminals to attract victims underscores the broader challenge of online financial scams.
Oliver emphasized the importance of awareness and individual responsibility in preventing such scams, suggesting that reducing the number of victims is key to making these fraudulent activities less lucrative for scammers.
MetaTrader was temporarily removed from Apple’s App Store in 2022 due to concerns related to these scams but was reinstated in March 2023 after MetaQuotes, the developer, took steps to meet Apple’s standards. These steps aimed to make it harder for scammers to misuse the platform for fraudulent activities.
Romance scams on the rise
On Valentine’s Day, Binance warned against romance scams, which constituted about 2% of all reported scam cases on their platform in 2023, with the financial impact of these scams exceeding tens of millions of dollars and averaging nearly $14,000 in losses per victim. This highlights the significant financial toll of dating scams and the critical need for increased awareness and prevention measures within the crypto community.
According to the 2023 Norton Cyber Safety Insights Report, more than one in four adults globally has fallen victim to an online dating or romance scam.
In the United States, reports of such scams to the Federal Trade Commission jumped from 11,235 cases in 2016 to 52,593 by 2020, a 368% increase. By 2022, the number of reported cases rose further, nearly reaching 70,000, with victims suffering a total loss of $1.3 billion. Despite cryptocurrency not being the primary method of payment in these scams, it accounted for 34% of the total reported losses. However, the overall share of crypto transactions associated with illicit activity is small and decreasing, thanks to efforts by industry leaders like Binance to bolster security and user education.
In Canada, the Canadian Securities Administrators’ (CSA) warned that romance scams increased 24% year over year (1,546 in 2020 vs. 1,928 in 2021), costing innocent people over $64 million in 2021 compared to over $27 million in 2020.
In the UK, the number of people duped by romance scams rose by 22% compared to the previous year, according to Lloyds Bank. Women reported higher average losses (£9,083) compared to men (£5,145). Individuals aged 55-64 were most frequently targeted, with a 49% rise in cases from 2022. Those aged 65-74 suffered the highest financial losses, averaging £13,123.
