Crypto Claims
Crypto Investment Frauds
One area of investment claims we continue to face questions about is Cryptocurrency. Many people are confused as to whether Bitcoin (BTC) and it’s various counterparts like Tether (USDT), Enthereum (ETH) and Binance Coin (BNB) among many others have made many a millionaire having seen exponential growth mostly since 2010.
However, where there is opportunity there are always opportunists and fraudsters have been fast to pray on the general publics lack of understanding with the creation of Crypto funds.
Why is Crypto Currency so high risk?
There are a few defining factors to this however the primary reason is that Crypto Currency is not regulated by any bank, institution or currency. There is therefore no practical way to predicate its value which can fluctuate massively. This makes for massive potential gains and also massive potential losses.
Today (November 2024) Crypto Currency remains an unregulated investment which means investing in cryptocurrency directly does not come with any protection from the Financial Conduct Authority (FCA) or the Financial Services Compensation Scheme (FSCS).
Do cryptoassets have value?
Absolutely, yes it does as you can use Crypto Currency to purchase items (where accepted). Some people even believe that its lack of centralised banking actually makes it the currency of the future over and above traditional currencies which are tied to a particular country and its economy.
Crypto Currency is not a regulated investment, so why are the FCA involved in Crypto Investment Claims?
We regularly make claims where unregulated investments have failed. Whilst the investment itself is not regulated, the promotion of any investment in the UK is regulated and may even be deemed as financial advice.
On 8th October 2023, the FCA ruled that firms marketing cryptoassets fall under the UK Financial Promotions Regime, even if they are based overseas.
To lawfully promote cryptoassets to UK consumers, firms must utilise one of the following four routes:
- Promotion by an FCA-Authorised Person: The promotion is communicated directly by a person authorised by the FCA.
- Promotion Approved by an FCA-Authorised Person: An unauthorised person can make the promotion if it has been approved by an FCA-authorised person. Note that legislation is underway to introduce a regulatory gateway that authorised firms must pass through to approve financial promotions for unauthorised persons.
- Promotion by an FCA-Registered Cryptoasset Business: The promotion is communicated by a cryptoasset business registered with the FCA under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs).
- Promotion Complying with an Exemption: The promotion complies with the conditions of an exemption in the Financial Promotion Order.
Promotions not made through one of these routes are in breach of Section 21 of the Financial Services and Markets Act 2000 (FSMA), constituting a criminal offence punishable by up to two years’ imprisonment, an unlimited fine, or both.
5 Signs You May Have Been Mis-Sold a Crypto Asset
The Risks Weren’t Clearly Explained
Were you fully informed that investing in cryptoassets is high-risk and that you could lose all your money? If the promotion did not include clear warnings about the risks, it may have been misleading.You Were Offered Incentives to Invest
Were you encouraged to invest through offers such as ‘refer a friend’ bonuses or other incentives? Such tactics are banned under UK regulations to prevent undue influence and may indicate an improper promotion.You Felt Pressured to Invest Quickly
First-time investors must be given at least 24 hours to consider their decision. If you were rushed or pressured to invest without adequate time to reflect, the promotion may have breached FCA rules.The Information Was Misleading or Incomplete
Promotions must be clear, fair, and not misleading. If the details provided were overly positive, lacked balance, or omitted important information about the risks, you might have been mis-sold.The Investment Wasn’t Suitable for You
Firms are required to assess whether a cryptoasset investment is appropriate for your knowledge and experience. If you were encouraged to invest without this assessment, the promotion may not have complied with the rules.
If any of these points apply, we may have grounds to question the way the cryptoasset was sold to you.
Can you claim for mis-sold cryptocurrency investments?
Yes, it is possible to seek compensation if you have been mis-sold a cryptoasset, but this depends on the specific circumstances and whether the promoter has breached FCA regulations.
When can you Claim Compensation for Crypto Investment?
– If the Promoter is FCA-Authorised or Approved
If the promotion was conducted or approved by an FCA-authorised firm, such as a financial adviser, and it breached the FCA’s financial promotion rules (e.g. by being misleading, unclear, or omitting key risks), you may have grounds for a claim. The firm could be held liable for your losses. We can pursue these claims directly through the Financial Ombudsman Service or the Financial Services Compensation Scheme if the regulated firm is no longer trading.
– If the Promoter Was Operating Illegally
If the promoter was operating outside FCA rules (e.g. without authorisation or approval), this constitutes a criminal offence. While the FCA itself does not compensate investors, legal action against the promoter could lead to financial redress.
– Under Misrepresentation or Negligence
If the promotion misrepresented the investment’s risks or made false claims, you could pursue a civil claim for compensation under misrepresentation or negligence laws.
Limitations on Compensation
Are cryptoassets covered by the FSCS?
Cryptoassets are not regulated financial products, so they are not protected by the Financial Services Compensation Scheme (FSCS). This means you cannot claim compensation from the FSCS if the promoter goes out of business (unless they were a regulated company) or fails to pay.
What if the people responsible don’t have any money?
If there is no regulated party involved, the cryptoasset promoter’s financial status becomes crucial when pursuing a claim. Even if your claim is upheld in court, your ability to recover money depends on whether the promoter has sufficient funds or assets to pay compensation.
Steps to Seek Compensation
1. Gather Evidence
Collect all materials related to the promotion, including adverts, emails, contracts, and transaction details. Our team can assist with gathering evidence by writing to the various parties involved, however if they are unregulated our power to demand information is somewhat limited, therefore we always advise you to gather as much information as possible.
2. Assessing your claim
We will analyse the evidence and determine the most effective way to proceed with your claim, while also providing an estimate of the losses you have suffered. Our goal is to identify the route with the highest likelihood of success; however, in some cases, we may pursue multiple claims on the same matter.
3. Submitting Your Claim
Our team will conduct a detailed interview with you to fully understand your circumstances before preparing and submitting your complaint to the relevant parties.
4. Escalation to the Financial Ombudsman Service (FOS)
If the promoter is FCA-authorised and does not resolve your complaint satisfactorily, we will escalate your case to the FOS. The FOS can award compensation of up to £375,000 for complaints made after April 2023.
5. Pursue Legal Action
If we are unable to achieve the desired outcome through the FOS, or if the promoter is unauthorised and we cannot escalate your complaint, we may advise you to pursue a civil claim through the courts.
No-Win, No-Fee Support for Cryptoasset Claims
While claiming compensation for cryptoasset mis-selling can be challenging purely due to the unregulated nature of many crypto investments, taking prompt action and seeking advice increases your chances of achieving a positive outcome.
Claim My Loss is here to guide you every step of the way, and our no-win, no-fee service allows you to pursue matters to the full extent of the law without any financial risk.
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