Crypto scams: how they work and how to check a firm

What is a crypto scam?

A crypto scam uses deception to take someone's money, crypto-assets or access to a wallet. It can begin with an investment advert, an unexpected message or someone pretending to offer support. A convincing website or a familiar company name does not establish who is behind the offer: fraudsters can copy identities, logos and documents.

The practical questions are who is contacting you, what they are asking for and whether their identity and permission to provide the service can be checked independently.

Warning signs and common patterns

• An investment offer with pressure to act. An advert or message promises fast or unusually high returns, then presses for a payment before there is time to check the offer. Urgency and unsolicited offers are warning signs. Misleading social-media promotions, including those involving influencers, can also be used to attract people to an offer.
• Someone posing as support or a trusted firm. The contact asks for a password, private key or recovery phrase. A recovery phrase is the sequence of words used to restore wallet access. Sharing it can let someone else control the assets; requests for it are a recognised scam pattern. The wallet explanation shows how keys control transfers.
• A fee to release or recover money. Someone demands an administrative payment or claims to be a regulator helping recover lost funds. The European Securities and Markets Authority (ESMA) never approaches people to request personal details or administrative fees on the pretext of recovering lost money.

These patterns concern the offer and the contact. A token's price falling, by itself, does not establish that fraud has occurred.

How to check a firm in Europe

The relevant register depends on the service. A broker handling securities and a platform holding crypto-assets for customers do not have the same authorisation.

A broker or investment firm

In the EU, a firm needs authorisation to provide investment services. National regulators publish registers, and ESMA provides a public register of authorised firms. For an investment-firm entry, ESMA's guidance is to check that the entity type is “Investment firm” and its status is “active”. The record also identifies the services or activities covered.

Search the firm's legal name through the regulator's own website, opened independently of any link in an unsolicited message. Then check the contact details independently: a real authorised firm can still be impersonated. A matching name alone does not prove that the person sending the message works for it.

A crypto-asset service provider

ESMA's MiCA register, named for the EU's Markets in Crypto-Assets Regulation, includes authorised crypto-asset service providers and non-compliant entities. It also lists crypto-asset white papers and issuers of certain stablecoins. A service-provider entry and a white-paper entry mean different things: the listed white papers have not been reviewed or approved by an EU national authority.

For an unfamiliar token, the issuer's identity and white paper help establish what is being offered. Their presence in a register does not establish the investment's quality. MiCA regulation explains which assets and services the framework covers.

Warning lists and the limits of a check

National regulators publish warnings about unauthorised firms, and the IOSCO Investor Alerts Portal collects warnings from its members. An absent warning does not establish that an offer is legitimate. Authorisation identifies a firm's permission to provide services; it does not promise that an investment will retain its value or that misconduct cannot occur.

If you have been targeted

ESMA's guidance is to stop contact with the fraudsters, report the case to local police and inform the national financial regulator. Its victim guidance also links to the European e-Justice Portal for information about victims' rights.

Keep passwords, banking details, private keys and recovery phrases confidential. Any later offer to recover the money for a fee needs the same independent identity checks; a claim to represent a regulator is not proof.

Where does a crypto ETP fit?

An exchange-traded product (ETP) is a security held in a brokerage account. A purchase through an authorised broker's verified service is a securities transaction, rather than a transfer of crypto-assets to a person who contacted you. The investor does not manage the underlying crypto-assets' private keys.

Virtune Bitcoin Prime ETP provides Bitcoin price exposure through a physically backed security. The investor owns the ETP, while Bitcoin is held as collateral within the product's custody arrangements. What an ETP is explains that ownership.

This does not remove fraud or investment risk. A scammer can impersonate a known issuer or broker, and the ETP's value can fall with Bitcoin's price. The holder also relies on the issuer, custody and collateral arrangements. The Virtune Bitcoin Prime ETP page brings together its costs, documents and available brokers.