Recently I was discussing with a client his plans for future investment. He advised me that he had been thinking about investing in Cryptocurrency. Cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. Bitcoin is the best known cryptocurrency, but there are now plenty of others.
The relatively anonymous nature of digital currencies has made them very attractive to criminals and also one of the most common kinds of investment scams.
The Australian Securities and Investments Commission found there were 582 reports of investment scams in the first half of this year – more than double last year’s 275 reports for the same period.
Deputy Chairman Peter Kell said: “Investment scams were the most damaging type of fraud last year, estimated to have overtaken romance and dating scams in terms of the total amount taken.” SOURCE
Before you take the plunge, you need to understand the risks. Below are three reasons that cryptocurrency may pose a risk.
Reason 1: If It Seems Too Good To Be True It Usually Is
With a rise in interest for cryptocurrency comes an increase in people falling for scams. Don’t fall for hard sell tactics or too-good-to-be-true offers, especially when received over email or social media messaging, as these are likely phishing attempts.
The best defence against these scams is to remain vigilant. It is wise to take time to consider any offer that sounds too good to be true, as well as getting independent financial advice and doing some research.
Reason 2: Investment Scammers Are Persuasive
Very few people actually understand cryptocurrency and this makes it easier to for the scammers to make false promises and unusual moves without getting caught. The scammer applies persuasive techniques to identify your financial status and encourages you to transfer money into their investment scam.
On the face of it, they can seem perfectly legitimate, appearing knowledgeable with websites, testimonials and marketing material. The scammers will adapt and find ways to exploit popular trends, new platforms, new ways of communicating, fad products or new investment opportunities.
Reason 3: Reporting Is Low
Victims of these investment scam often feel embarrassed and confused which makes them less likely to report the crime. They may also struggle to own up to their losses, or the full extent of them. With the lack of these crimes being officially reported it is compounding the problem as the community is less aware of the risks.
The more reports of these crimes that are received will lead to vital intelligence needed to protect consumers and prevent others from falling into these traps. Reports of investment scams can be made at https://www.moneysmart.gov.au/scams/report-a-scam
Investing in cryptocurrency can be quite high risk and speculative. Cryptocurrency is currently unregulated, unlike real currencies. It is highly advisable to consult a properly licensed financial adviser who will work with you to provide financial advice in relation to regulated investments.
About Massey Financial Advice
I am a Brisbane-based Financial Adviser with more than 14 years of experience working with professionals to achieve financial freedom. I have clients in Brisbane, Ashgrove, The Gap, Kenmore and Chapel Hill.
Sometimes people don’t really understand their financial situation – whether that be their personal cash flow, wealth creation or retirement plan. And this puts their lifestyle at risk. I partner with professionals so that they feel empowered to make the best financial choices for them, their family and their career.
The first step is to book a cost and obligation free Financial Gap Strategy Session by clicking the link below. This is a phone call at a time that suits you to discuss what you are working to achieve and find out whether I can help.
If you would care to share your experience with me, please comment below!