Nova Scotians have lost more than $750K to new cryptocurrency scam

Nova Scotians have been swindled out of nearly $750,000 since the fall due to a cryptocurrency scam that can target the same victim twice, says the Nova Scotia Securities Commission.

About 20 to 25 people have reported falling victim to what's referred to as a "pig butchering" scheme, and many more people likely haven't reported it. Individual losses range from a few thousand dollars to tens of thousands of dollars, said David Harrison, an investor education and communications officer with the commission. 

He said there have also been a few people who've lost in the ballpark of $100,000.

"If you hear from anyone that you don't know who's contacting you through a social media app or by text, immediately believe that this person is out to take something from you, out to scam you," he told CBC Radio's Information Morning Nova Scotia on Tuesday.

Harrison spoke with host Portia Clark about how this scam works and how people can avoid it. Their conversation has been condensed and edited for clarity and length. 

You can listen to the full interview here:

How does it work? I understand it usually starts with a message you're not expecting, an unsolicited message.

Typically you'll receive an unsolicited message through text or social app like WhatsApp or Telegram from someone just contacting you out of the blue. They'll try and develop a relationship with you, and after developing that relationship ... they'll mention that they have made a considerable amount of money over time through some kind of crypto investment and try and talk you into investing as well. 

Typically that first investment will be something small, maybe a couple hundred dollars — something that doesn't seem as risky to take on. And then after you make that investment, the person will show you a fake screen capture or fake wallet or fake account balance, showing that initial investment has made a considerable amount of money over a short period of time to try and engage or talk you into investing a whole lot more.

This is the fattening up the pig stage?

Yes, basically the fattening of the pig stage where they'll try and talk you into using a credit card or taking out a line of credit, or any other way you can get at money to try and invest more.

Then typically what will happen is the victim will try and make a withdrawal from their account at some point. The person [will say] you have to pay some kind of a tax or fee to withdraw that money. That is completely fake as well because no investment has been made so there's no money to withdraw in the first place.

Some people will end up actually paying that tax and fee to try and get their money, which will also be lost ... The person they've been interacting with will usually disappear at that point with their money as well.

And then after that, they're contacted by someone saying they can help them recover some of the losses?

That's what's known as the recovery-room scam. It happens in other scams as well, but it's been very proficient in this scam. After losing the money, the victim will be contacted by someone else. Typically this is just the scammer calling them again, acting as another person, saying that they could potentially get their money back for a fee.

Sometimes they'll impersonate a law enforcement person, a lawyer, a bank manager, saying that they've tracked down the person that scammed them and they're able to get their money back. But to release that money they have to pay a fee, some kind of banking fee. They're using the person's loss to re-victimize them, unfortunately.

This has happened to people, they've been doubly scammed?

Yes, this has happened not only in this type of scam, but it also has happened in other types of scams as well because the scammer has a lot of information about that person.... They collected over the time. And since they've taken part in the scam, they know exactly how much money they've lost, how they lost it. 

We do want to remind Canadians that they're highly risky investments — not only due to scams.- David Harrison, Nova Scotia Securities Commission

If people still want to invest in crypto, what's your advice on that?

Securities regulators are not against cryptocurrencies or crypto-investments, but we do want to remind Canadians that they're highly risky investments, not only due to scams — which is one of the reasons they're most risky at this time — but also due to volatility and other risks they hold. 

Most Canadians are unaware that to legally operate in this country, and in the province of Nova Scotia, a crypto trading platform must be registered with securities regulators. In Nova Scotia that's us, the securities commission. So on our website, people can find a list of crypto trading platforms that are currently registered. That means regulators like us and other regulators in Canada have oversight of them, to make sure they're abiding by certain rules and regulations.

It also helps that we know who's running these crypto trading platforms and who's behind them. That's one of the major dangers when you invest with an unregistered platform, that you don't know where it's located, who's running it, and if it's currently legit, and that they're safely managing your money and actually investing it in the first place.