With cryptocurrency’s meteoric rise, a largely unlegislated sector has attracted a wave of scammers. Josh Chinn, Co-Founder of Wealth Recovery Solicitors discusses red flags for investors to look out for.
It was a gap in the market which led Josh Chinn to co-found Wealth Recovery Solicitors (WRS), with two other partners three years ago: “I set it up with one other solicitor and an ex-Manchester United player. I had a client who was doing similar work to this. They were based in Israel and needed Financial Conduct Authority (FCA) regulation. The law firm I was working with at the time absorbed the Israeli employees and carried on the work. We just really kicked on and found a niche in the market surrounding cryptocurrency scams, and trading scams in particular.”
The anonymity and lack of legislation involved in crypto trading attracts scammers as they think they can steal funds without being caught. Luckily, thanks to advanced tech, this isn’t the case: “In-house, we have tools where we can locate where different cryptocurrency has been moved to. It’s one of the most common scams because they get the victim to send sums in cryptocurrency because it’s anonymous. They think they’ve got away with it because of that, but we have the same tools that the likes of the FCA and FBI use, so we can basically look at the blockchain and see where they’ve hidden it.
“Cryptocurrency scams are the most common scams that we deal with. They’re the highest value ones, they’ll look like a legitimate trading platform, but they’ll say that in order to deposit fund into the client has to send cryptocurrency. The client buys legitimate cryptocurrency and holds it in their own wallet. Then the scammer will give them a wallet address to send the cryptocurrency, allegedly to fund the trading platform. But really what happens is the minute it goes into someone else’s wallet address; the client has lost control of the cryptocurrency.”
Luckily, there are some warning signs to look out for if you’re unsure whether someone is attempting to scam you: “There are red flags to look out for. Normally the client will realise: A) when they try and withdraw the money and face some sort of problem, or B) the scammer will ask for further funds to release the money, which should never happen. The FCA register might pick up on it if there have been other victims, so always check their register. There are some simple things to look out for such as checking the address they are using. If a scammer is using, for example, a London address, it will normally be a service office, such as a WeWork one. So that will be a telltale sign. But normally the victim will start to realise when they’re having trouble with the withdraw button.”
Should you fall victim to a scam, there are some steps you should immediately follow: “The first port of call will always be never to part with more funds, no matter how genuine it sounds. You should never have to pay ‘tax fees’ or ‘recovery fees’ to release your money. The second thing is always to report it to Action Fraud. If you are looking for recovery, make sure to do research on who you are using, because a lot of recovery companies are also scams. They should have a legitimate UK site – so you can visit the office if necessary – and check them out on third party websites.”