UAE empowers crypto investors in fight against scamsters

It has become clear that the UAE has recognised the tremendous potential of cryptocurrency and blockchain technologies, and is set to be a hyper-connected city as well as an ever-evolving business hub. One of the outcomes of Dubai’s will to become a global centre for crypto assets is the establishment of the largest crypto exchange platforms.

For instance, Binance, the world’s leading cryptocurrency trading platform, was granted a licence to operate in Dubai, and in April 2022, Bybit and announced their establishment here. Moreover, Dubai has enacted a new law aimed at establishing the emirate as an international centre for crypto assets and related industries, such as the metaverse, and creating the Dubai Virtual Assets Regulatory Authority to oversee the regulation, governance, and licensing of virtual assets.

Unfortunately, the downside of the exponential growth of crypto industry is the increase of crypto scams in the UAE. According to the Head of the Digital Assets Crime Section at the Dubai Police, in the first half of 2021, there were hundreds of crypto scams in Dubai with Dh80 million lost in total.

Crypto scams occur using diverse means, as outlined below:

Transfer recall scam: The scammer buys cryptocurrencies and sends funds to the seller and they receive the tokens. However, he then files a fraudulent complaint with their bank to recall the transferred funds.

Peer-to-peer transactions using illegally gained money: A person offers to purchase tokens at a fair price, which is in fact from criminal proceedings. The victim indirectly becomes a partner in the crime.

Rubber cheque: The scammer offers to buy cryptocurrency at a decent price using a rubber cheque.

Third-party scam: The scammer, posing as a broker, finds a seller and a buyer, convinces them to meet in person for the transaction and asks the buyer to bring cash. He then gives the buyer’s money to the seller and asks the seller to send the cryptocurrency to a trading account, which is his own account instead of the buyer’s account.

Copycat administrator: Occurs in Telegram groups, often after a member of the group requests advice. The scammer messages the user, posing as an administrator, offers help which involves asking for the target’s private keys or requesting that they login into a fake platform meant to steal the member’s account details and have access to their wallet.

Pump-and-dump crypto group: The scammer attempts to coordinate price manipulation on a cryptocurrency exchange. Tokens are then pumped by the scammer (the founder or an insider), who then sells his tokens on a short-lived exponential rise in price on crypto-exchanges, which then crashes.

Giveaway scam: The victim is tricked by being offered free cryptocurrency or NFTs in exchange for his wallets’ public addresses and private keys. The giveaway advertisement can be from legitimate pages.

Counterfeit NFTs: The scammer hacks an NFT, recreates it and sells it on legitimate platforms.

In most of these scams, the scammer enters into agreements with the victim without making it formal. Therefore, it becomes harder for the victim to proceed with legal action against the scammer.

How to avoid such scams

First and foremost, it is fundamental that no personal information is shared and that anonymous calls, messages and ads are ignored.

The Digital Assets Crime Section of Dubai Police was created last year as a proactive approach in response to the increase of cybercrimes happening around crypto matters. The head of section stated: “There is no harm in asking companies and people to provide them with a copy of trade license because it’s public information and not confidential. Also make sure the license is not photoshopped.”

Then, it is essential to conduct all transactions using exchange platforms that are regulated by the UAE financial regulator by checking for example with Dubai Financial Service Regulatory Authority (DFSA) or the Abu Dhabi Global Market (ADGM) for their licence and regulatory permission.

The UAE Security and Commodities Authority (SCA) has a list of alerts for falsely claiming to be regulated by it. As for DIFC, the DFSA has sent alerts about fraudulent crypto-assets.

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