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Crypto assets – the next big scam?

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Government-backed City watchdog, Financial Conduct Authority (FCA) reminds consumers that it has no regulatory oversight over crypto-assets and NFTs.

The last decade has brought new words like ‘cryptocurrency’, ‘blockchain’, ‘bitcoin’ and, more recently, ‘NFTs’ (non-fungible tokens). Seen as the ‘next big thing’, few fully understand this emerging world. And where there is uncertainty, confusion or an opportunity to mislead, there will be scammers.

No consumer protection

In a recent statement, the FCA reminded consumers that it has no regulatory oversight over crypto-assets and NFTs. The FCA gave this stark warning:

“There are no consumer protections for those who buy any cryptoassets and NFTs, and they are not FSCS protected. As a result, if you buy cryptoassets you should be prepared to lose all the money you invest.”

Scammers have used social media advertising to promise financial ‘quick wins’, with would-be investors persuaded to transfer money to build cryptocurrency portfolios. Once the money has been sent and the victim realises that they have been scammed, there is little chance of getting the money back from the fraudsters, who may be overseas.

The Advertising Standards Authority (ASA) sets out guidelines, including for those marketing crypto assets and any adverts must state that they are not regulated by the FCA and not protected by financial compensation schemes, such as the Financial Services Compensation Scheme (FSCS), a Government-backed lifeboat initiative, set up to help victims of failed financial businesses.

New investors or those not familiar with the FCA’s remit may not realise how risky crypto investments can be. Concerns have been raised about the impact that social media ‘influencers’, such as reality TV celebrities and sports personalities can have when marketing crypto assets.

Contact the police and also your bank as a matter of urgency. You can also report any suspected scamming activity to Action Fraud, the National Fraud and Cyber Crime Reporting Centre. If you have lost money, that may lead to a criminal investigation by the police. If a criminal prosecution is successful, the court can award compensation.

But this is not always possible, particularly if the scammer is overseas or has no assets which can be used to pay compensation. In addition, you may have the basis of a complaint and claim against your bank if you feel that they did not do enough to protect your account.

Head of Professional Negligence, Sarah Spruce commented:

“Crypto fraud falls under Automated Push Payment (APP) or Bank Fraud. People see an online advert through a website or social media, believe it to be genuine, fill in an online form for a crypto portfolio and get access to their account. Once they have transferred money to the account, their access is revoked, they have lost their money and they don’t know how to get it back. The team at TLW Solicitors help clients investigate whether their bank could have done more to protect their money and in turn whether they may have the basis of a compensation claim.”

Currently, banks are not legally obliged to repay money that has been obtained fraudulently from crypto scams. Where a bank won’t pay the money back, it is possible to raise a complaint with the Financial Ombudsman Service (FOS). They have issued several important decisions recently, highlighting the duty of care banks have to apply due diligence when looking after their customers’ accounts. Banks must act on any ‘red flags’ such as customers being financially vulnerable and any unusual or out of character transaction activity. And FOS can order them to repay the stolen money along with compensation for their distress.

If you, your friend or a relative has been conned into making payments to crypto fraudsters, then please get in touch with our specialist Automated Push Payment (APP) Fraud team for a confidential, no-obligation discussion.

You can call us on 0800 169 5925, email info@tlwsolicitors.co.uk or complete the Callback form.

It is important to get advice as soon as possible as strict time limits can apply.

Meet Our Team

Meet Sarah, who heads up our experienced Authorised Push Payment Fraud Claims team.

Sarah and her colleagues are on hand to help with your claim.

“There are no consumer protections for those who buy any cryptoassets and NFTs, and they are not FSCS protected. As a result, if you buy cryptoassets you should be prepared to lose all the money you invest.”

FCA