How cryptocurrency scams have boomed under the cover of the pandemic

The Financial Ombudsman Service is now ringing alarm bells. The spread of crypto through social media is something big tech must address, writes James Moore

Cryptocurrency scams have boomed during the pandemic (Getty Images)

There’s been another epidemic percolating under the cover of the one caused by the all-too-familiar coronavirus. Its nasty little brother won’t kill you. But that doesn’t mean it isn’t vicious, damaging and painful.

The Financial Ombudsman Service (FOS) is this morning seeking to draw attention to it with a view to containing its spread. That could prove challenging but it has to at least try.

The body, set up to resolve disputes between consumers and financial services companies, is reporting a “dramatic rise” in complaints about frauds while people have been locked (down) in their homes.

This is depressing but probably not terribly surprising. During the Second World War there were people who burgled bombed out houses, engaged in profiteering and ensured that there was a flourishing black market.

The pandemic is a very different crisis – we’ve probably seen too many wartime analogies through its course. But it should sadly come as no surprise that unscrupulous individuals have nonetheless sought to use the crisis in an attempt to profit from people’s misery.

Reporting figures for the first quarter of the current financial year (which starts in April), the FOS said that the number of scam-related cases it dealt with increased by two-thirds. Six in 10 of the cases it received were upheld, also an increase.

Of particular concern to its staff has been the way cryptocurrency fraud has grown like mould in a damp house. Cases are running at three and a half times the level they were at over the same period last year.

It isn’t hard to see how this has happened. Younger people on furlough have been catnip to crypto con artists. Bored and faced with 20 per cent cuts to their incomes under the government’s Job Retention Scheme, some inevitably have turned to the internet in search of ways to make extra money.

Trawling social media and video-hosting channels like YouTube, they will have likely found themselves bombarded by crypto companies flaunting their product, and by crypto conmen flaunting their scams. It isn’t always all that easy to differentiate between the two given the way some of the claims made by the former die a vampire’s death in sunlight.

Cryptocurrencies are unregulated. The overview of the industry surrounding them is limited at best. The Financial Conduct Authority has tried to ring alarm bells of its own. It has even kicked a crypto exchange out of the country. But there’s only so much it can do under the current legal framework and the FOS has frequently found itself in the position of picking up the pieces as a result.

At this point it is worth noting that if you authorise a payment to a scam artist your bank is not required to compensate you under the law. There is a voluntary scheme in place so you probably won’t lose money, even if you have to call on the ombudsman to get the problem dealt with.

But the banks are going to start getting chippy about it if they end up losing large sums through consumers failing to take precautions and to obey the time-tested maxim “if it looks too good to be true it probably is”.

If they’re unhappy, they really ought to turn their fire on the social media companies, which have, yet again, been playing the role of facilitators while failing to properly police their platforms.

The epidemic of vaccine misinformation spread through social media channels led President Joe Biden to complain that “they’re killing people”. However, that will fade as the pandemic fades and the creator of the Oxford/AstraZeneca jab has (mercifully) said that it will do that.

But the problem of financial scams will remain, whether they’re linked to cryptocurrencies or some other get-rich-quick scheme.

It remains far too easy for them to be spread via social media. The FOS figures clearly show that the problem needs to be addressed with a degree more urgency than at present.