The Financial Advisory and Intermediary Services (Fais) Ombud has provided consumers with a number of tips to help them avoid becoming a victim of cryptocurrency scams.
This follows a slight uptick in complaints about cryptocurrency investments to the Office of the Fais Ombud.
Read: Fais Ombud now able to take on crypto asset complaints
The ombud, Advocate John Simpson, on Monday advised consumers to exercise caution to try and minimise their risk of falling victim to scams by looking out for some key aspects when considering investments in cryptocurrency-related investments.
Simpson said cryptocurrency assets are becoming a new asset class and an alternative to the more traditional asset classes, such as equities, bonds, property and cash.
“The consensus however is that it can be regarded as a risky investment with high volatility,” he added.
“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,” he said.
The tips to avoid cryptocurrency scams include:
Checking the authenticity of a cryptocurrency exchange before using it by, for example, reading reviews, because fake exchanges can look genuine but are run by fraudsters who want to steal your money.
Being aware and alert for scammers who use malware or hacking to gain access to investors’ accounts to steal their cryptocurrency.
Being cautious of unsolicited offers or cold calls that promise high earnings or guaranteed returns.
Being wary of individuals or entities who demand upfront payment or ask for access to your bank account information.
Being mindful of fraudulent schemes that use fake websites or emails to trick investors into revealing their login information or secret keys.
Being on the lookout for fraudsters who spread false or misleading information about a cryptocurrency to artificially inflate its price and then sell its own holdings at the inflated price, thereby leaving investors with worthless coins.
Avoiding scammers who create fake social media profiles or pages to promote their scams and lure investors into fraudulent projects.
Being aware of SIM-swapping scams, where scammers use a victim’s phone number to gain access to their cryptocurrency accounts to steal their funds.
The Fais Ombud has only been able to investigate complaints related to cryptocurrency assets since October 2022 and was forced to dismiss complaints received prior to this because cryptocurrencies were not classified as a financial product and fell outside the ombud’s jurisdiction.
However, the Financial Sector Conduct Authority (FSCA) tightened up the regulation of crypto assets in October 2022 by officially declaring that crypto assets are now classified as financial products in terms of the Fais Act (act 37 of 2002).
Simpson said there has been a slight increase in complaints received by his office about cryptocurrency-related investments since crypto assets were declared financial products.
Fais Ombud spokesperson Thuso Ngwagwe confirmed to Moneyweb last month that the Office of the Fais Ombud has not yet issued any determinations regarding complaints received in respect of investments made into cryptocurrency.
Ngwagwe attributed this to the fact that prior to 19 October 2022 crypto assets were not a financial product.
“All complaints received prior to 19 October 2022 in respect of investments made into cryptocurrency were dismissed by this Office as we did not have jurisdiction to entertain these matters,” she said.
Ngwagwe confirmed that the office of the ombud has since the beginning of the 2022/2023 financial year on 1 April 2022 received a total of eight complaints in respect of cryptocurrency.
However, only three of these related to investments made after 19 October 2022 and will be considered by the ombud.
The ombud on Monday stressed that if anyone believes they have been financially prejudiced because of the financial service rendered to them about crypto assets, or indeed any other financial product, they should visit the ombud’s complaints portal at www.faisombud.co.za and select ‘Lodge a Complaint’.
Alternatively, they may:
Submit a complaint in writing to email@example.com or fax: 012 348 3447/012 470 9097.
Call the ombud’s client care centre on (012) 762 5000 or Sharecall 086 066 3274 for assistance in submitting a complaint.
Listen to Darren Hanekom of Hanekom Attorneys speaking to Moneyweb Crypto host Ciaran Ryan about how regulations will reshape cryptos:
You can also listen to this podcast on iono.fm here.