Let’s pull back the curtain on crypto fraud to explore how these digital scams unfold, how investors get caught, and how you can protect yourself.
Let’s pull back the curtain on crypto fraud – a place where investments and savings can vanish in seconds – and explore how these digital scams unfold, how investors get caught, and how you can protect yourself.
In general, crypto fraud involves schemes that use cryptocurrency to trick people into losing money, sometimes by promising incredible returns, other times by impersonating legitimate companies. These scams span a variety of situations. On the business side, ransomware attacks often demand crypto payments. On the individual side, investment style fraud is far more common, and many people don’t realize how legitimate and professional these schemes can appear. We’re seeing dashboards and investment platforms that look real, and scammers who present themselves as credible professionals.
How often are people being crypto scammed and what are the impacts?
Canadians are losing record amounts of money to crypto scams – according to the Canadian Anti-Fraud Centre, Canadians reported losses of $224 million to cryptocurrency investment in 2024.
Unfortunately, because crypto is my niche market, about half the clients I see have been victims of crypto fraud. That’s alarming – if you’re working in general tax, it’s rare to encounter clients with losses of this magnitude. The financial impacts vary from losing a few thousand dollars to over $10 million. And the damage isn’t just financial; these scams take an emotional toll on victims because there is a lot of stress and shame involved. Victims often feel they “should have known better,” so they delay seeking help and during that time negative emotions can snowball. The more people who come forward and talk about their experiences, the more we become aware of the schemes and the better chance we have of stopping these crimes.
How is crypto fraud evolving?
The biggest shift is the level of sophistication. I’m seeing far more team based operations now. It used to be that a victim interacted with one person and one platform. Now we see coordinated teams pose as customer support, financial advisors, compliance staff, and even tax professionals – online and over the phone.
We’re also seeing crime rings impersonate real professionals who already have community trust, and that’s a scary evolution. I specialize in this area nationally, and I was recently impersonated. Someone contacted me saying, “I’ve been dealing with you for six weeks, but I don’t think it’s you.” They had been defrauded by someone pretending to be me.
What crypto scams are increasing and affecting Canadians the most?
A popular crypto scam is one called a pig butchering scam. It typically begins with someone being approached online, sometimes with a romantic angle, sometimes through mentorship or investment opportunities. Over time, the scammer convinces the victim that they have access to an incredible investment opportunity.
It snowballs from there. These “investment accounts” are usually funded with crypto, even though the accounts don’t exist. Many claim to be for stock or futures trading and insist the victim must fund them with crypto – a major red flag, since legitimate platforms don’t operate that way. But the platforms look legitimate, and victims see fake gains, so they keep investing more and more money over time.
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What other red flags should investors watch for?
Along with stranger danger, pressure tactics are a major warning sign, even when subtle. Keep in mind that you should be investing because you want to, not because someone is enticing you or making you feel that it’s urgent to keep funding an account. Another red flag is when the rules keep changing. Maybe you could wire money at first, but now you’re told to send crypto. Maybe you could withdraw a small amount early on, but now you have to jump through hoops to access your funds. When the rules shift, it’s time to pause and seek external guidance.
What are the first signs someone has fallen for a crypto scam?
The biggest sign is being unable to withdraw funds. Typically, the victim has invested heavily, believes they’ve made good returns, and tries to cash out. At that point, they often can’t reach the person they were dealing with or any customer service. Sometimes the platform disappears entirely. More commonly, victims are told there’s an issue with their funds. They may be accused of doing something wrong and told they owe a fine or penalty. Or they’re told they need a certain amount “on hold” in the account to withdraw.
What should someone do first if they realize they’ve been scammed?
Start by involving your family so you have emotional and practical support, then go to the police and file a report. Clearly explain what happened so they can document the losses and, in some cases, trace the perpetrators. Next, report the fraud to the national anti fraud center. These steps are non negotiable because these agencies track cases across the country. This video contains a deeper dive on actions you should take if you’ve been crypto scammed.
What best practices help protect people from crypto related scams?
Along with watching for red flags, documentation is critical. People should keep records of absolutely everything, including who they spoke with, bank statements showing where funds were sent, exchange information, wallet addresses, transaction hashes, texts, emails – any evidence you have. Because some platforms may not be legitimate or traceable later, screenshots of all records are especially important.
Candy M. Davis is a CPA in Alberta and the founder of Davis Accounting & Tax. She is one of Canada’s leading experts in cryptocurrency and digital asset tax accounting. Candy is a member of CPA Canada’s Cryptocurrency Working Group and the founder of The Canadian Institute of Digital Asset Taxation.
