The Crypto King: How To Avoid Being Scammed
Crypto and scam. Two words that are (sadly) seen together a lot. Both of which were core themes of the recent Netflix hit, ‘Trust No One: The Hunt for the Crypto King’. Today, we’ll give an overview of what the show is about and then explain some ways to avoid getting scammed. After that, we’ll take our regular look at all of the top fundamental events to watch out for this week.
Spoiler alert! While we don’t give too much away here, if you’ve not watched the Netflix show and really want to, maybe skip the next few paragraphs!
What happens in the Crypto King?
In 2013, Gerry Cotten launched QuadrigaCX, a Bitcoin exchange located in Canada. He quickly became one of the most recognisable faces in the increasingly popular world of crypto.
Things were going well for QuadrigaCX and its users — until they took a sudden and brutal turn for the worse. As Bitcoin started to drop, users desperately tried to get their money out but were unable to do so. The site eventually stopped responding, and the company ceased operations. It was revealed that Gerry Cotten had died . So that was the reason for the lack of communication.
At the time the company collapsed, it owed its users both cash and cryptocurrency, with a combined value of $215 million.
The controversial bit? Many people believe that Gerry Cotten’s death, and therefore the excuse for the company folding and the loss of all of that cash, was made up. Users believed that he had faked his death and ran away with the cash…
How did the scam operate?
The show outlines a few points, such as the fact that Cotten used to credit the accounts of unsuspecting users with cryptocurrencies that never truly existed. He would also take users’ deposited crypto and trade with it on other platforms. He allegedly lost around $150 million by gambling with other people’s money.
When one user wanted their money back, Cotten would take it from another user and pay them their money, which seemed legit. This all became impossible when everyone suddenly wanted their money at once.
How to protect your crypto
If you’re a crypto investor or just someone who’s generally interested in the market, the Netflix show does make you stop and think; how can I avoid this kind of scam happening to me?
One thing that would definitely help is not leaving your crypto on an exchange. The best way to store your investments is in a cold wallet.
Cold wallets do not connect to the internet therefore, they are not prone to cyberattacks. Storing your private keys in a cold wallet or hardware wallet is the most viable option as these come encrypted, keeping your keys secure.
You should also make sure you use a secure internet connection and update your passwords regularly. One final tip: beware of phishing emails! If an email doesn’t look safe, it probably isn’t.
The age of regulation
Additionally, and fortunately, the crypto market has come a long way in the last 10 years, particularly in terms of exchange regulation. Here are a few examples…
In the US, cryptocurrency exchanges are legal and fall under the regulatory scope of the Bank Secrecy Act (BSA). This requires US-based exchanges, like Coinbase, to register with FinCEN, implement an AML/CFT program, maintain appropriate records, and submit reports to the authorities. The US Securities and Exchange Commission (SEC) considers cryptocurrencies to be securities and applies securities laws to digital wallets and exchanges.
After leaving the EU in 2020, the UK transposed cryptocurrency regulation requirements set out in 5AMLD and 6AMLD into domestic law. Cryptocurrency exchanges register with the Financial Conduct Authority (FCA) and comply with AML/CFT reporting obligations.
The European Union
We’re still waiting for EU-wide legislation. Getting everyone to agree is never an easy thing! In certain member states, exchanges have to register with their respective regulators, e.g. Germany’s Financial Supervisory Authority (BaFin), France’s Autorité des Marchés Financiers (AMF), or Italy’s Ministry of Finance.
What do you think?
Did you watch the show? Do the current regulations make you feel confident in investing in crypto? Let us know by tweeting us at @_Contentworks!
Top trading events week commencing 18.04.22
It should be a pretty quiet week this week, here’s when and where you need to tune in.
● CNY — GDP Growth Rate YoY (Q1)
No major events are planned.
● CAD — Core Inflation Rate YoY (MAR); Inflation Rate YoY (MAR)
● NZD — Inflation Rate YoY (Q1)
● EUR — Core Inflation Rate YoY Final (MAR)
● JPY — Inflation Rate YoY (MAR)
● GBP — S&P Global/CIPS Manufacturing PMI Flash (APR)
● S&P Global/CIPS UK Services PMI Flash (APR)
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The Contentworks team