Warning for Nova Scotians About Crypto Scams

The Nova Scotia Securities Commission is issuing an urgent warning about a widespread scam after numerous Nova Scotians – and other Canadians and U.S. residents – were victimized, suffering substantial losses, including individual losses of hundreds of thousands of dollars.

The scam is often referred to as a “pig butchering” scheme and typically proceeds as follows:

• the victim receives an unsolicited message via text, email or social media, or clicks on an ad for crypto trading on social media sites
• the victim is often directed to use a different messaging platform, such as WhatsApp, Telegram or SMS text, through which the scammer attempts to develop a personal relationship with the victim; these platforms make tracing the scammer difficult, if not impossible
• the scammer then persuades the victim to open a crypto trading account and deposit a small initial amount of money by describing great profits
• a short time later, the scammer shows the victim fake account statements indicating large gains and persuades the victim to invest more, which is called “fattening up the pig”; these are fake documents as the scammer has not actually used the money to purchase crypto
• when the victim attempts to withdraw money from the account, the scammer demands fictional taxes or fees to access their funds; if the victim insists on withdrawing funds, whether or not they have paid the additional amounts, the scammer continues to delay or disappears.

The scammers not only gain access to the victim’s deposited funds through the crypto account, but instruct the victim to download trading apps or file-sharing software that give the scammer access to the victim’s mobile device or computer to obtain personal and financial information they can use to steal more money. The scammer may also sell this information to other scammers, who will try to further exploit the victim.

After losing money through the scam, the victim is often contacted again by the scammer posing as someone who can get the lost money back for a fee, known as a recovery scam. Victims of this type of scam are unlikely to recover their money. People should resist responding to unsolicited requests or ads asking for more money to recover losses.

The technologies used by scammers seldom leave a trail, and even if they can be identified, they are usually located outside Canada and the U.S., so beyond of the reach of Canadian and U.S. securities regulators.

While the commission is interested in receiving reports of losses by crypto investors from these scams, from experience, there typically is little that can be done to recover these funds. Recognizing and avoiding such scams is the only real protection for investors.

Important information and advice for people considering trading in crypto assets:

• crypto asset trading is highly risky, especially from scams, but also from volatility, hacking and other risks including technology failures
• only use crypto asset trading platforms or dealers registered in Canada; a list of registered platforms is on the commission website
• giving out any personal or financial information, or downloading trading apps or file-sharing software, opens people to financial and identity theft
• people should never use credit cards or lines of credit to invest
• losses from crypto assets scams are often significant and unrecoverable.

Quotes:

“While there are always fraudsters inventing new schemes, these so-called ‘pig butchering’ scams involving crypto assets have become very prevalent and are claiming many victims, many with very large losses. Everyone should be very wary for themselves and their friends and family members of unsolicited messages or advertisements recommending investment in crypto assets. Regulators in North America believe more than $1 billion has been lost to crypto scammers since 2021 and that amount only continues to increase. Canadians who wish to trade crypto assets should do so only through Canadian-registered crypto trading platforms or dealers.”

– Paul Radford, Chair, Nova Scotia Securities Commission

Quick Facts:

• it is illegal to solicit investments in Nova Scotia without registering with the commission and complying with Nova Scotia securities laws, unless an exemption applies
• crypto trading platforms must register with securities regulators to legally operate in Canada

Additional Resources:

To file a complaint or report a scam to the Nova Scotia Securities Commission: https://nssc.novascotia.ca/recognize-and-report-scam

List of crypto trading platforms registered in Nova Scotia: https://nssc.novascotia.ca/registered-crypto-asset-trading-platforms