Business Maverick

SCAM WARNING

Be cautious: FAIS ombud issues crypto-assets alert

Be cautious: FAIS ombud issues crypto-assets alert
(Photo: Unsplash / Michael Fortsch)

When Bitcoin was first introduced, many were sceptical. However, since its first trade at $0.0008 in July 2010, investors have seen this cryptocurrency rocket to its current value of $24,450. Since it burst on to the scene, thousands more cryptocurrencies have entered the market, and, with them, an increased risk of scams and fraud.

The Financial Advisory and Intermediary Services (FAIS) Ombud, advocate Nonku Tshombe, has issued a warning reminding consumers to exercise caution when investing in cryptocurrency.

Since the Financial Sector Conduct Authority (FSCA) announced its regulation of cryptocurrency, the ombud has seen a slight increase in related complaints.

The warning follows a recent move by the South African Advertising Regulatory Board to add a new clause to its Code of Advertising Practice dealing with cryptocurrency products. In a nutshell, companies advertising crypto-assets have to be explicit in terms of warning consumers that these are high-risk products and that you can risk losing your capital.

Investors worldwide lost money when cryptocurrency exchange FTX collapsed in November last year. Founder Sam Bankman-Fried is on trial for what is being called one of the largest fraud cases in US history.

Tshombe says some of the key aspects to look out for when looking to invest in cryptocurrency-related investments include:

  • Before using a cryptocurrency exchange, check its authenticity, for example, by reading reviews, as fake exchanges can look genuine, but are run by fraudsters who want to steal your money.
  • Watch out for scammers who use malware or hacking to gain access to investors’ accounts to steal their cryptocurrency.
  • Be cautious of unsolicited offers or cold calls that promise high earnings or guaranteed returns.
  • Be wary of individuals or entities who demand upfront payment or ask for access to your bank account information.
  • Be mindful of fraudulent schemes that use fake websites or emails to trick investors into revealing their login information or secret keys.
  • Be on the lookout for fraudsters who spread false or misleading information about a cryptocurrency to artificially inflate its price and then sell their own holdings at the inflated price, leaving other investors with worthless coins.
  • Avoid scammers who create fake social media profiles or pages to promote their scams and lure investors into fraudulent projects.
  • Be aware of SIM swapping scams, where scammers use a victim’s phone number to gain access to their cryptocurrency accounts to steal their funds.

“Cryptocurrency assets are becoming a new asset class and an alternative to the more traditional asset classes such as equities, bonds, property, cash etc. The consensus however is that it can be regarded as a risky investment with high volatility.

“One should only consider an investment into cryptocurrency if you have a high-risk tolerance, and you are in a strong financial position where you can afford to lose any money invested.

“An investment into cryptocurrency should only form part of a diversified portfolio, and then only after you have received advice from a registered financial services provider as to whether an investment into cryptocurrency is appropriate in view of your financial needs and circumstances,” she says. BM/DM

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