How does a crypto investment scam actually work?
Date: | Week: 36 | Reading time: 7 minutes | Updated: Author: Simcha Schrijver
In short
A crypto investment scam usually revolves around four parts: drawing people in, persuading them, a platform that shows profits, and a route along which the money disappears. But not every platform with disappointing results is a scam. Whether you are dealing with one only becomes clear once someone actually follows the payments.
Paucitas is an independent expert firm in the Netherlands that investigates investment fraud and crypto fraud, handling hundreds of cases a year. We follow your payments and show you what happened to your money.
Get in touch with Paucitas or ring +31 20 244 5774, even if you are still unsure.
In a nutshell
Returns on a screen prove nothing; your own payments do. Unsure about a platform, or already paid in? Let Paucitas take a calm look first, before you pay anything further.
Perhaps you have been investing for a while through a platform that looks professional. The balance keeps rising, someone guides you personally, and yet something is nagging at you. Or you want to withdraw money and keep being given a new reason why that is not possible yet. That feels unsettling, and understandably so. This article explains how such a set-up often works, so you can recognise the signs and know what to do.
How does a crypto investment scam work?
In a crypto investment scam you get an account where a balance keeps growing, while in reality nothing is being invested. Your deposit goes somewhere else. The screen is there to give you confidence. It is a form of investment fraud, and it often works like a Ponzi scheme: anyone who wants to withdraw is paid out of new investors' money.
That is why a small withdrawal sometimes works. It builds trust. With a larger withdrawal, a reason suddenly appears why you must pay something first, such as tax, a deposit or a verification fee.
What are the four parts of such a set-up?
- Intake: adverts, fake news articles, groups in messaging apps or an unexpected contact on social media.
- Persuasion: a friendly account manager, sometimes with a second person posing as a specialist.
- The platform: a website or app with an account, a balance and charts. Technically simple, but it carries the whole story.
- Outflow: the addresses and accounts through which deposits disappear, often via a collection point and then onwards in stages.
The FCA describes similar warning signs in its guidance on investment scams. Do you recognise one or more parts in your own situation? That does not yet mean you have been scammed. It may also be a badly run platform. You only get clarity once someone follows your payments.
Which signs can point to a scam?
- withdrawing does not work, or only after an extra payment;
- you are asked not to discuss the offer with anyone else;
- stopping is always just the worst possible moment;
- the transactions the platform shows cannot be found anywhere on the blockchain;
- the firm appears on the FCA Warning List.
If it is months about trust before money comes up, it is often called pig butchering. If it is fast and high-pressure, it looks more like a boiler room. How to spot a fake crypto platform in advance is covered in recognising a fake crypto platform.
Would you rather know for sure straight away? Let Paucitas look at your platform and payments. You can ring us at any time, 24/7, on +31 20 244 5774.
Where does your money go after the deposit?
Almost never straight to a final destination. It usually lands first at a collection point, together with other people's payments. It is then split up and moved on, often until it arrives at an exchange. That last point is valuable: that is where the records sit that the authorities can request. More on this in where your money goes after investment fraud.
Did you first pay through your bank to an exchange? Then there is a trail there as well. That applies to app-based banks and traditional high street banks alike, as all banks are subject to the same supervisory rules.
An example from practice
A man invested through a platform that showed him healthy monthly returns. When he wanted to withdraw a larger sum, he first had to pay "tax". He had doubts and rang Paucitas.
The investigation showed that not a single transaction on his account existed on the blockchain. His deposits came together at an address that also received other people's money, and then went in parts to two exchanges. He then knew where his money had gone and what his next steps were. When he reported it, the report was a strong attachment, and he paid nothing more.
Paucitas takes privacy very seriously and never shares clients' personal details. This is a composite example: names, amounts and details have been changed. The situation is one we see in practice.
What should you do if you have already paid in?
It is best not to pay anything extra, not even if you are promised a withdrawal after one more payment. Keep everything you have: payments, screenshots and messages. Also watch out for firms that approach you afterwards promising to recover your money for an upfront fee. That is a recovery scam. Nobody can promise in advance that the money will come back. Paucitas can show you where it went, though, and sometimes more turns out to be possible than you thought.
What Paucitas does for you
Paucitas looks into everything for you: whether the transactions shown really exist, the route of your money, the parties that received it and the documents. Paucitas also reads through all the conversations, emails and other communication, so you get the full picture: a timeline and where all the money went, step by step. Paucitas does all its tracing itself, without tracing tools. You receive a report that anyone can follow and understand step by step, including the police and your solicitor.
- Costs: every investigation is tailored. You receive a bespoke quote in advance, which we go through together, with no surprises.
- Turnaround: from the same day to around two weeks.
- Your details: Paucitas never asks for your recovery phrase or private key.
What can you do with the Paucitas report? It shows whether money is still available or where it went, and what the next steps are. In a case of fraud, one of those steps is reporting it to Report Fraud in England, Wales and Northern Ireland, or to Police Scotland. The Paucitas report is a strong attachment that sets everything out fully and clearly. Who else plays a role is explained in scammed with crypto: where to turn. What we do for private individuals is on our page for private individuals.
Doubts about a platform? Get in touch for a free intake, or ring +31 20 244 5774. Through the form, you will hear from us within 1 to 3 hours.
Sources: National Crime Agency, fraud and economic crime; FCA Warning List; Report Fraud; Police Scotland, scams and frauds.
Do you have questions about this blog?
Feel free to get in touch with Paucitas. Paucitas can be reached by phone 24/7, including evenings and weekends. Through the contact form we usually reply within 1 to 3 hours, and we answer e-mail within 24 hours.
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Frequently asked questions about a crypto investment scam
How do I know whether my platform is a crypto investment scam?
Paucitas finds it is often impossible to tell at a glance. We check whether the transactions shown really exist and where your deposits went.
Why did my first withdrawal work?
Paucitas sees in practice that a small withdrawal is sometimes paid out deliberately to build trust. It says little about the rest of your balance.
Do I have to pay tax or fees to withdraw my balance?
Paucitas advises being careful with that. It is best not to pay anything extra until someone independent has looked at your situation.
What is the difference between pig butchering and a boiler room?
Paucitas sees the main difference in the pace. Pig butchering builds trust over a long time; a boiler room works with pressure and haste.
Can Paucitas help if the platform is abroad?
Paucitas can help then too, because the route of your money can be followed on the blockchain, wherever the platform is based.
From Amsterdam, for the whole of the UK
Everything can be done fully online. Prefer to meet in person? You are very welcome at our office in Amsterdam, by appointment.
Paucitas is an independent expert firm based in the Netherlands that, for clients across the UK, investigates investment fraud and crypto fraud, establishes the origin and legitimacy of crypto assets and prepares expert reports for legal proceedings and compliance.
Your own situation
If you are reading this, you probably have a question about your own situation. That is exactly what Paucitas does.
The first step is contact by phone. You can book that call by phone or through the contact form, so you do not have to wait. In the call we look together at what can factually be established in your case and what Paucitas can examine for you.