Canadians are losing millions in crypto to fraudsters. Here’s how to spot the red flags

Canadians are losing millions of dollars to cryptocurrency fraud schemes, and at least one Ontario detective specializing in the area predicts such scams will soon overtake wire transfers as the largest payment method used by fraudsters.

Ontario provincial police are warning potential cryptocurrency investors to do more to protect themselves as the digital currency grows in popularity.

OPP Det.-Const. John Armit, of the anti-missiles branch, says crypto scam cases are difficult for police to solve because the currency can be sent quickly to exchanges in different jurisdictions around the world, which may or may not be willing to cooperate with police from the province.

“Once you send the crypto, it’s basically gone. It’s very difficult to come back,” he said.

According to the Canadian Anti-Fraud Centre, Canadians lost more than $94 million in crypto payments between January 1 and September 30 of this year. That’s compared to losses of $124 million in all of 2023, more than $19 million more than the previous year.

In Ontario, victims lost nearly $23 million in crypto investment scams between January 1 and September 30 of this year, the data shows. The issue is of such concern to police that last month, the OPP launched an initiative called Project Atlas to fight cryptocurrency investment fraud and protect victims in Ontario and abroad.

Often with crypto fraud schemes, individuals come across online ads to buy crypto for as little as $250, Armit says. Once they invest, the suspect will direct them to a web page to show them how much their money has grown and encourage them to invest more.

Eventually, victims discover that the profit they supposedly made was fake and they lose their crypto and money.

As the value of some cryptocurrencies are approaching new heightsmore criminals are looking to get their hands on them, experts say. This includes a kidnapping case that took place last month in Toronto, where the CEO of a crypto company was snatched downtown during rush hour and held for a $1 million ransom. Dean Skurka, president and CEO of Toronto-based financial firm WonderFi, was released after a $1 million ransom was paid electronically, a source close to the investigation previously told CBC Toronto.

Armit says that while the OPP has seen extortion scams in the past, the November incident was unusual, and he suspects similar extortion incidents could happen sooner rather than later.

“We’re finding that organized crime is more reckless these days,” he said.

Since launching Project Atlas, Armit says investigators have identified victims in 12 countries and 2,000 cryptocurrency wallet addresses belonging to victims around the world.

How to avoid a crypto scam

If you are interested in investing in crypto, the best way to do it is through using a provincially regulated companysays Perry Quinton, manager of investor education and outreach at the Ontario Securities Commission (OSC), the province’s independent agency responsible for regulating Ontario’s capital markets.

According to the OSC website, each of these companies is subject to terms and conditions set by regulatory bodies, including at the national level. One of the commitments it asks platforms to make is to ensure they don’t spend customers’ crypto investments and use them as collateral.

Even with these protections, however, Quinton has a caveat.

“Crypto assets are high risk… Don’t use money you can’t afford to lose because this is a very speculative business,” Quinton said.

Some of the red flags to look out for are unsolicited calls or messages, and endorsements from celebrities and social media influencers, she says. If in doubt, check with a multi-source company such as an investment advisor.

And one of the most important tools an investor can use to protect themselves from loss or fraud is education, says Lucas Matheson, CEO of Coinbase Canada, a cryptocurrency dealer registered in Ontario. A good place for people to start is by learning the crypto protocol, he says. This means knowing the rules of operation and exchange of a digital currency.

“I think what we learned from the US election is that crypto is here to stay,” he said.

But Matheson also encourages people to be cautious along the way.

“Like our parents told us, ‘If it’s too good to be true, it probably is too good to be true,'” he said.