A case where a man lost $15,000 on a cryptocurrency investment scam has highlighted how easy it is to fall victim to scammers.
That's according to the Financial Services Complaints Limited (FSCL), a dispute resolution scheme which warned the man - named only as Isaac - about the exchange platform, which Isaac used to buy cryptocurrency to invest in an investment scheme.
But because he had already received returns, he chose to continue.
The FSCL said that one of the key signs that it was a scam was a return on the initial.
The other key signs of a scam were being offered guaranteed returns, a photo on the company’s website purporting to be the CEO appeared to be someone else, and the incorporation certificate was from a Caribbean country though it claimed to be a US company.
Isaac believed that the exchange platform should not have authorised his transactions and argued that the platform had a responsibility to verify the merchants their customers pay Bitcoin to.
Although the exchange platform had set out their concerns at the time, it was only when Isaac had lost all of his investments and asked the exchange platform to refund him for the Bitcoin he had invested, that he understood the exchange platform was not liable.
The exchange platform said they have no responsibility over what their customers do with their Bitcoin after they have purchased it and had made reasonable attempts to warn Isaac about the investment scheme.
“We considered the exchange platform’s obligations under the Financial Markets Conduct Act 2013 (FMCA) not to engage in misleading or deceptive conduct,” FSCL chief executive officer Susan Taylor explained.
“The exchange platform had complied with their obligations to ensure their messaging about the risks and rewards of buying crypto assets were balanced, and they had pointed out the risk of investing Bitcoin to Isaac as soon as he registered.
"We also considered the exchange platform made reasonable attempts to warn Isaac of the scam. We were satisfied that the exchange platform had not engaged in deceptive conduct.”
The exchange platform did not “authorise” Isaac’s transactions because Bitcoin is kept in online anonymous “wallets”.
“We were pleased to see the exchange platform update their policy for dealing with potential scams after the incident with Isaac,” Taylor said.