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Cryptocurrency scams

Region: Ontario Answer # 7606

Cryptocurrency is a digital or virtual currency that exists only electronically. It gets its name from the encryption software it uses to verify transactions. Regular money can be exchanged for cryptocurrency and:

  • bused to buy products or services,
  • transferred to someone else.
  • traded for other currencies, or
  • acquired for speculative purposes

In Canada, cryptocurrencies are legal, but are not considered legal tender as they are not controlled by centralized entities such as central banks, The government only recognizes the Canadian dollar as the official currency of Canada. Although a business can choose to accept cryptocurrency as payment, formal entities, such as the Canada Revenue Agency, do not accept cryptocurrency (e.g. you cannot pay your taxes with cryptocurrency).

Common types of cryptocurrency include Bitcoin, Ether, Ripple, and Litecoin.

Types of cryptocurrency scams include:

  • cryptocurrency investment fraud
  • fake initial coin offerings (ICOs)
  • pump-and-dumps
  • blackmail scams / extortion
  • fake cryptocurrency exchanges, and
  • phishing scams

If you have been charged with a criminal offence, it is important to hire an experienced criminal defence lawyer as soon as possible.

Cryptocurrency investment fraud

Cryptocurrency fraud typically involves offers to invest money in fake cryptocurrency promising a high rate of return in a short amount of time. These fraudulent financial opportunities often appear through emails, text, or in social media posts. In the fraud, the fraudster provides fake documentation as evidence of the investment, however, the money invested is never used to buy cryptocurrency.

Initial Coin Offerings (ICOs)

An initial coin offering (ICO) is a method used by an individual or company to raise money for a new cryptocurrency venture. In exchange for a financial contribution, the investor will receive digital tokens issued by the company which are designed to be exchanged for the business’s new cryptocurrency. In an ICO scam the ICO is fake and there is no new venture. The fraudster pitches high investment returns, but in reality, the victim will lose their investment and, in some cases, their personal and financial information.


In a “pump and dump” fraudsters promote the purchase of a cryptocurrency in order to boost demand and fraudulently inflate the price (“pump”).  When the price soars, they sell to unsuspecting investors making a quick profit (”dump”). The fraudsters get rich, and investors are left with nearly worthless coins.

Blackmail scams / extortion

Crypto blackmail refers to any threat that is accompanied by a demand the victim pay money to a cryptocurrency address. In the scam, the victim is contacted by the scammer, usually by email, and threatened. The scammer may claim they have access to the victim’s personal information (such as banking or tax info), browsing history or passwords, or they have an embarrassing video of the victim. They demand that the victim transfer crypto to their wallet address to make the problem go away.

Blackmail is an offence under section 346(1) of the Criminal Code. It is known as Extortion, and is defined as the following:

  • 346 (1) Every one commits extortion who, without reasonable justification or excuse and with intent to obtain anything, by threats, accusations, menaces or violence induces or attempts to induce any person, whether or not he is the person threatened, accused or menaced or to whom violence is shown, to do anything or cause anything to be done.

Extortion is punishable by up-to life in prison.

Fake cryptocurrency exchanges

A fake cryptocurrency exchange is a crypto trading provider that claims to have authorization or affiliation with a fictitious regulator, or it may claim to be certified with or a member of a legitimate regulator when it is not. These scammers will create very legitimate looking websites that might target victims with fake promotional offers. They may charge ridiculously high fees or pressure victims into creating an account and depositing funds. It is usually very difficult to withdraw funds, or deposits may never be returned and simply disappear altogether.

There are 12 cryptocurrency trading platforms are authorized to operate in Canada, check with Canadian Securities Administrators for the list.

Phishing scams

A phishing scam involves fraudsters contacting someone by email, text, social media or a voice message) and pretending to be from a recognizable institution or company, such as a bank, credit card company, a collections company, or government institution, such as the CRA. The scammer will use basic information about the victim in an attempt to trick them into providing sensitive or private information, or in a cryptocurrency phishing scam, transfer cryptocurrency, such as Bitcoin, as soon as possible. They may threaten the victim telling them they owe money and are facing legal action if they don’t comply with their request.

Along with fraud and extortion, cryptocurrency scammers can be charged with a number of offences under the Criminal Code, such as money laundering.

How to report a cryptocurrency scam

If you are a victim of a cryptocurrency scheme or attempted scheme, or other type of financial or investment fraud, contact the Canadian Anti-Fraud Centre, your local police or RCMP.

Get help

To erase your criminal record, call toll-free 1-888-808-3628 or learn more at Pardon Partners. It’s easier than you think.

If you have been charged with a criminal offence, it is important to hire an experienced criminal defence lawyer as soon as possible. Contact our preferred criminal defence expert, Calvin Barry Criminal Lawyers for a free consultation at 416-938-5858 .

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