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FINANCIALLY AESTHETIC · GUIDE 37/37
SURVIVING CRYPTO: SECURITY, SCAMS, RECORDS & EXIT RULES
FA-7.5 · Crypto & Digital Assets
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RISK FRAME
Crypto survival is operational: permissions, keys, records, scams and decisions made before euphoria.
Understanding Crypto Fraud
Cryptoassets are generating growing interest. However, this craze also attracts fraudsters ready to exploit investors through convincing pitches or so-called golden opportunities. It’s crucial to know how to spot scams to protect your money and avoid pitfalls.
A crypto fraud occurs when a fraudster takes advantage of the growing popularity of crypto to lure you with the promise of high returns. They entice you to invest - often through persuasive pitches or so-called “golden opportunities” - only to eventually disappear with your funds. These scams are often carried out by individuals or organized groups that are highly skilled at manipulating investors. Their goal is to extract as much money as possible before vanishing, leaving their victims with substantial losses.
After Forex, binary options, and diamonds, scammers have turned to crypto-assets or “cryptocurrencies.” These assets have sparked a craze among scammers, and fake platforms have proliferated. Keep in mind that no reputable company can guarantee a minimum return on an investment in “cryptocurrencies” or crypto-assets. When faced with claims that sound too good to be true - promising guaranteed high returns - there’s only one piece of advice: stay away.
Phishing and Social Engineering: Scammers with Well-Rehearsed Pitches
Scammers use well-known techniques. They contact their potential victims by email, phone, social networks, or private messaging apps - sometimes after the victim has entered their contact information into a form on a website offering investments in “cryptocurrencies.”
At first, they come across as very friendly and seek to build trust. Their pitch is always very elaborate, and they often rely on an entire network of fake “industry professionals.” They emphasize the rise of “cryptocurrencies,” particularly Bitcoin, and dangle the prospect of a “2.0” currency with highly attractive returns.
The scammers invite their future victim to invest their money directly on a fraudulent platform - which, of course, is not authorized to offer services involving crypto-assets - or suggest that the victim convert their money through an authorized crypto-asset service provider (PSCA) before directing them to a fraudulent trading platform.
After investing - starting with small amounts at first - the victim is allowed to make an initial withdrawal of the so-called profits. Now that the victim has complete confidence in the investment, they invest larger sums, which, this time, will never be recovered. The scammers eventually become unreachable or come up with various excuses to prevent further withdrawals (funds frozen for a minimum period, technical issues, etc.). In some cases, they even ask the victim to make additional payments to resolve the issue, for example, by claiming that fake “taxes” or “duties” must be paid.
Financial investment scams aim to steal the victim’s savings by luring them with the promise of substantial returns on investments that turn out to be fictitious. In practice, scammers contact victims in various ways (social networks, instant messaging, forums, dating sites, online or email ads, sponsored articles, etc.) and may engage in impersonation of well-known financial institutions, whether French or foreign. They may also pose as “influencers,” investor groups, or even strangers met online, etc.
Once contact is established, a fake adviser increases the frequency of communication with the victim in order to build a “special” relationship and gain the victim’s trust through persuasive rhetoric. Scammers may also operate websites or apps that appear very professional. After an initial investment that seems to yield quick returns, the victim is pressured to invest more (an initial payment of €200 or €250 is often requested). However, once the amounts invested become substantial or the victim wants to withdraw their capital, the scammers demand payments for “fees,” become more distant, and eventually go off the grid - or their website may even disappear. The victim is then unable to recover their money.
Warning Signs
Here are a few signs that can help you spot a fraud attempt:
Social network scams are often accompanied by enticing ads offering training and advice on how to become a crypto expert in a short amount of time. Behind these offers, fraudsters seek to make initial contact and gain your trust. Their goal is to extract personal information and as much money as possible by encouraging you to follow their recommendations or purchase their services.
This type of fraud often begins with an online encounter on a dating app or a social network. A so-called “friend” strikes up a conversation by discussing shared hobbies or interests. Then, after a few pleasant exchanges, the person tells you about their investments in crypto and the high returns they claim to have earned. Little by little, they build a relationship of trust and offer to help you so that you, too, can benefit from high-return investments. Eventually, this “new friend” disappears with your money, and you’re left with no recourse.
Initial cryptoasset or token offerings, commonly known as “ICOs” (for Initial Coin Offering), are extremely high-risk and highly volatile forms of investment. While some of these projects are legitimate, many others have turned out to be fraudulent. Fraudsters often use these new offerings to lure investors by promising astronomical returns, before disappearing with the money.
Fraudsters may first convince you to buy crypto on an initial platform, then - after falsely establishing a relationship of trust - persuade you that transferring these assets to another platform will increase your returns. The second platform, supposedly more profitable, is actually fraudulent and displays fake results. Once the transfer is complete, your crypto assets are stolen, and you will be unable to recover them.
Fraudsters often use psychological tactics to gain your trust. If you’re hesitant, they may start by inviting you to invest a small amount. To reassure you, they’ll allow you to withdraw your funds, including the supposed profits. Once that trust is established, the fraudsters will use every means possible to convince you to invest more. Then, when you try to withdraw large amounts, they’ll cite all sorts of fees and delays. Eventually, the platform and the fraudsters will disappear with your money.
Other Schemes to Watch Out For
- The scam within a scam, or refund scam: Once the scammers realize you’ve caught on, a second scam may unfold. A new person (a lawyer, bank, or government agency) contacts you and leads you to believe that you’ll be able to recover your funds… by paying even more money! Remember: neither your bank, nor the AMF, nor any other authority will ever contact you on their own initiative to help you recover lost funds.
- Playing on emotions: To trap you, scammers know how to build trust. A “romantic relationship” on dating apps, “friendship” on social networks, “deep concern” for the personal situation of elderly or isolated individuals… Be wary of what these people - whom you’ve never actually met in person - say, and of people who seem overly well-meaning.
- Impersonation: Scammers may impersonate public figures, newspapers, or well-known news outlets. They create fake websites and social network accounts and spread fake articles and statements, or use images from TV shows to entice you to invest in their fraudulent platforms. Always verify the reliability of your information sources!
- Online training courses: These paid courses promise to teach you everything you need to know about trading crypto-assets. Be careful! You don’t become a trader in just a few hours. It is a profession that requires many years of study and involves highly risky speculative activity. Be wary of these so-called training courses and the platforms through which you’ll be encouraged to invest - they could be fraudulent.
There are many red flags that should raise your suspicions. Some are easy to spot: for example, guaranteed high returns (over 2 - 3%) - that simply doesn’t exist! Other red flags may alert you - take the time to look at the details: lack of legal notices, a sketchy website presentation, contact information and bank details for a contact person abroad, etc.
Testimonials: The Real Cost of Scams
Mr. C signed up for a “crypto” trading platform. Out of curiosity, he decided to invest €1,000. Contacted in the middle of the night, he was offered the chance to take a position that could yield a huge profit, but he had to decide on the spot and deposit €10,000. Since Mr. C couldn’t come up with that amount immediately, the platform advanced him the money. The next day, an “advisor” called him back to announce that he had just won €100,000! However, because of the cash advance provided by the platform, he had to share 50% of his winnings with them and therefore pay €50,000 to recover the funds. Fortunately, the size of the winnings aroused Mr. C’s suspicion, and he refused to give them the money. He lost €1,000, but narrowly avoided losing another €50,000!
Ms. A thought she was buying “cryptocurrencies.” After an initial payment, she was regularly contacted by the platform to encourage her to invest more and more, eventually paying a total of €53,000. As soon as she asked to get her funds back, no one answered her calls anymore, claiming that her “account manager” was in a meeting, on vacation, or on sick leave. Filing a complaint is now her only option.
Mr. V invested €70,000 on a “crypto” platform. Warnings from the AMF on this subject prompted him to be wary. He therefore decided to withdraw his funds. To do so, the platform demanded that he pay various taxes to which he was supposedly subject. However, these taxes were fictitious or did not apply to Mr. V; they therefore provided yet another reason to doubt the site’s reliability. Here too, filing a complaint is his only option.
Antoine has been interested in investments for a while. On social networks, he’s seeing more and more content about crypto. Several people seem to be making quick profits. One day, an influencer he follows recommends a new crypto that, according to him, “is going to skyrocket.” Antoine, impressed by the influencer’s ease and confidence, tells himself that someone who speaks with such assurance must surely know what they’re talking about.
The influencer posts videos regularly. His explanations are always simple and convincing. He shares examples of impressive returns and says he wants to help his followers “seize their chance.” Antoine listens, observes, and lets himself be swept up by this sense of credibility. Reassured by the influencer’s confident tone, Antoine decides to take a chance. He invests a small amount, simply to see if the influencer’s promises hold up.
Antoine notices that the platform shows him gains right from the first few days. The influencer repeats that “the window is short” and that those who hesitate “always miss out” on a golden opportunity. Driven by this sense of urgency, Antoine increases his investments. What he doesn’t know is that the influencer is being paid to promote this cryptocurrency. Antoine has no idea what the real intentions of the people behind this scheme are.
One morning, Antoine checks his account: the platforms associated with the project no longer show any activity. The money has been embezzled. As for the influencer, he seems to have vanished into thin air. Antoine realizes he’s been manipulated. He then discovers that the consequences go beyond the loss of money: shaken trust, harder decisions to make, and the feeling of having been duped. And yet, it’s not his fault. Fraudsters know how to exploit our emotions and use formidable persuasion techniques. Bouncing back will take time… and support.
Why Crypto Transactions Don’t Forgive Mistakes
Transactions Are Irreversible
Accidentally sending crypto to the wrong wallet address is a common mistake. A transaction sent on Ethereum is irreversible. Unless you know the owner of the address and can convince them to send your funds back to you, you won’t be able to recover them.
Always make sure that the address you’re sending to matches the intended recipient’s address exactly before sending a transaction. When interacting with a smart contract, it’s good practice to read the transaction message before signing.
These assets are unique in that they combine two innovative technologies that secure transactions, even without a trusted third party: i) blockchain, which irreversibly links transactions; and ii) distributed ledger technology (DLT), which allows every network participant to access the history of all transactions.
As innovative as these assets may be, their use nonetheless entails risks that experience has gradually revealed: beyond the potential loss of capital due to their volatility, the anonymous nature of these transactions makes them conducive to illicit activities (money laundering, financing of terrorism, tax evasion). Also, in the absence of legal protection, users are particularly vulnerable to scams and cyberattacks.
It is this irreversibility that explains why, once a transfer to a fraudulent platform or an address controlled by a scammer is confirmed, fund recovery becomes virtually impossible: on the other hand, with an illegal platform, your only recourse will be to file a complaint with the police or the gendarmerie. Unfortunately, in such cases, the chances of recovering your money are very slim, as scammers are most often based abroad.
Warning: In the event of a platform’s bankruptcy - even if it is authorized by the AMF - be aware that crypto-assets are not covered by the Deposit Guarantee and Resolution Fund (FGDR).
Scam tokens, fake interfaces, and malicious approvals
Fraudsters may sell you a scam token that looks like the legitimate token you wish to purchase but is actually issued by scammers and is worthless. They may also trick you into signing off on fraudulent transactions, typically by redirecting you to their own user interface. These interfaces may be near-perfect clones of legitimate websites, but with hidden traps.
Malicious developers can also embed backdoors in smart contracts. Some platforms ask users for permission to spend an unlimited number of tokens, which carries an increased risk.
Recommended safeguards include approving only what you need and regularly revoking access. Simply disconnecting your wallet from a project is not enough if token allocation permissions have already been granted - they must be revoked.
When interacting with smart contracts, do not allow unlimited expense limits. Unlimited expenses could allow the smart contract to empty your wallet. Instead, set expense limits only to the amount necessary for the transaction.
Protecting Yourself: Tips and Tricks
With the growing popularity of crypto, it has become increasingly difficult to distinguish legitimate offers from fraudulent schemes. However, by staying vigilant and taking a few simple precautions, you can protect your investments and avoid common pitfalls. Here are some tips to help you:
- Be wary of promises of unrealistic returns. There’s no such thing as a high return that’s risk-free. If an offer seems too good to be true, it’s probably a scam.
- Make sure that the person contacting you and the crypto-asset trading platform are registered with the AMF. Use the contact information listed in the records to reach out to the person and verify their identity.
- Refuse to transfer crypto to platforms that are not registered with the AMF.
- Be cautious if the platform is not based in Canada. Be wary of companies without a physical address in Canada or individuals who contact you from abroad.
- Take time to think it over. Before investing, make sure you have all the necessary information and fully understand the risks.
- Avoid investments advertised on social networks. Do not give in to solicitations from strangers on social networks, especially if you did not contact them yourself.
- Never share your confidential information. Never give your passwords or access to your computer to anyone, especially a stranger who claims to want to help you with investments.
- Do your own research. Consult several reliable sources and don’t hesitate to contact the AMF to verify the legitimacy of a platform or offer.
Additional precautions recommended by Cybermalveillance.gouv.fr:
- Be wary of investments presented as “risk-free,” offering high rates of return, quick profits, reserved for a select few, or “limited” in time.
- Do not respond to a sales pitch if you cannot positively identify the person contacting you. Also check the Autorité des marchés financiers (AMF)’s “blacklist” of unauthorized companies and websites. To confirm the information you’ve gathered, contact the financial institution directly.
- Verify that the person contacting you and/or the organization they claim to represent is authorized to operate in France by checking the Orias and Regafi databases.
- Take time to think it over; do not give in to pressure from the advisor to invest immediately, and do not execute a contract in a rush. Do not transfer any money, do not give out your bank card number, and do not install any apps at the advisor’s request.
- Before signing, request complete documentation and read it carefully.
- If you have any doubts or questions, contact the AMF’s Épargne Info Service (for financial products) or the Banque de France’s Assurance Banque Épargne Info Service (for banking or insurance products).
What to Do If You’re a Victim of Fraud
Keep in mind that anyone can fall victim to fraud - don’t blame yourself. Scams in the crypto space often rely on promises of exceptional returns, exploiting a lack of knowledge or the excitement surrounding these new technologies to manipulate investors. You should also cut off all contact with the person or people involved and stop sending any money. Be wary: fraudsters often target their victims more than once. They may contact you again, posing as a lawyer, a financial institution, or a company specializing in financial fraud, to offer to help you recover your money.
If you have been the victim of a financial investment scam, be wary of any solicitations from individuals or organizations claiming to help you recover your funds or claiming to have recovered them. In fact, it is common for victims to be contacted by other scammers (who attempt to defraud them again) in the weeks or months that follow.
Recommended steps for victims:
1\. Cease all communication with the scammer. Continuing to communicate with them puts you at risk of suffering even greater financial loss.
2\. If you have recently transferred funds, stop the transfer as soon as possible through your bank to try to block the transaction and recover the funds.
3\. Keep all evidence, including the website’s contact information, the company’s details, the contact information of the people you spoke with, copies of emails, or screenshots of messages exchanged with the scammers, signed contracts, wire transfer orders, or your bank transfers to document the expenses and their dates, as well as any ad or email that prompted you to invest, or any other information that may help you report the scam to the authorities.
4\. File a complaint at a police station or gendarmerie station, or in writing with the public prosecutor’s office of the judicial district where you reside, providing all the evidence in your possession. You can receive free assistance with this process from a France Victimes association.
5\. Contact a lawyer and/or a consumer advocacy group who can advise you on the necessary steps and, if necessary, represent you.
6\. For financial investments (stocks, bonds, cryptocurrencies, investment funds, etc.), contact the Épargne Info Service platform of the Autorité des marchés financiers (AMF) to report the fraud you have suffered and receive guidance on the steps to take.
Depending on the specific circumstances, the perpetrators may be charged with fraud (Article 313-1 of the Penal Code): fraud is defined as the act of deceiving a natural or legal person - either by using a false name or false title, or by misrepresenting a true title - or by the use of fraudulent schemes, to deceive a natural or legal person and thereby induce them, to their own detriment or to the detriment of a third party, to hand over funds, securities, or any property, to provide a service, or to perform an act creating an obligation or discharging one. Fraud is punishable by five years’ imprisonment and a fine of 375,000 euros.
Keeping Records: A Requirement, Not an Option
If you engage in cryptoasset transactions, you must maintain adequate accounting records to document each transaction. This requirement applies to both individuals and businesses.
You should retain accounting records of your cryptoasset transactions and the receipts associated with managing your tax status. Information on cryptoasset transactions must include the following:
- The number of units and the type of cryptoasset for each transaction;
- The date and time of each transaction;
- The value of the cryptoasset (in Canadian dollars) at the time of each transaction;
- A description of the nature of each transaction and the other party to the transaction (even if it is only the crypto-asset address);
- The addresses associated with each digital wallet used;
- The initial wallet balance (and its cost) and the final balance for each cryptoasset, for each year.
If you use cryptoasset exchanges or other custodial platforms, you must maintain accounting records of the following information:
- Transaction records (purchases, sales, and trades)
- Transfer records (deposits and withdrawals of cryptoassets and government-issued fiat currencies)
- Records documenting any other type of transaction conducted on the exchange
You can maintain your accounting records using manual methods of organization or storage, such as manually entering crypto-asset transactions into paper-based ledgers. However, there are various types of software that can be used to track crypto-asset transactions. Given the nature of crypto-asset transactions, the Canada Revenue Agency (CRA) encourages taxpayers to maintain their accounting records electronically.
If you use crypto-asset exchanges or other custodial platforms, familiarize yourself with your exchange or platform to ensure you can access the information you need. Crypto-asset exchanges have different standards regarding the types of accounting records they maintain.
You are responsible for retaining all accounting records for at least six years from the end of the last tax year to which they relate. If you use crypto-asset exchanges or other custodial platforms, it is advisable to regularly export your transaction history to ensure you maintain adequate accounting records in the event that an exchange ceases operations or stops offering services in Canada, or if you lose access to your account. Crypto-asset exchanges have different standards regarding the retention period for accounting records.
Cost Basis and Tax Return
As of January 1, 2023, the tax treatment of gains realized on digital assets depends on your status: individual seller or professional seller.
For individuals: Capital gains realized as part of the management of your private assets are taxed at the single flat-rate withholding tax (PFU) of 31.4% (12.8% tax + 18.6% social security contributions), regardless of the number of transactions. However, you may opt out of this PFU and choose the progressive tax scale if it is more advantageous for you by checking box 3CN on your tax return. This option is final and independent of the choice regarding income from movable capital. However, exchange transactions involving digital assets without a cash adjustment benefit from a tax deferral. You are exempt from taxation when the total sale price (gross annual amount of sales, not capital gains), excluding exchange transactions subject to a tax deferral, does not exceed €305 during the tax year.
For online filing: enter the total capital gain or loss for the year in Schedule No. 2086 of your online tax return. This schedule is located in Step 3; click the “Supplementary Schedules” button. The amount you enter will automatically populate box 3AN (capital gain) or 3BN (capital loss) on your main tax return.
For paper returns: Enter the total capital gain for the year in box 3AN of Form No. 2042 C (supplementary return). If you have a capital loss, report it in box 3BN. A capital loss may only be offset against capital gains of the same type for the same year; it cannot be offset against capital gains from the sale of other assets and cannot be carried forward to subsequent years. Details of the transactions must be provided in Supplementary Form No. 2086.
Note: Any individual who holds a digital asset account on a platform located abroad must report it. If filing online, these accounts must be reported at the end of the process. If filing on paper, you must report them by completing Form No. 3916-3916 bis, attached to your tax return.
Exit Rules: Decide on Them Before Emotions Decide for You
An exit rule doesn’t need to predict the next peak. Its purpose is to determine, before a period of panic or euphoria sets in, what will cause you to reduce or close a position.
Before buying, write down at least:
- your goal and time horizon;
- the maximum portion of your capital that you’re actually willing to lose;
- the conditions that would invalidate the reason you’re holding the asset;
- what you’ll do if the position becomes too large a portion of your portfolio;
- how you might take profits on a portion of your holdings rather than letting your decision be entirely driven by the fear of selling or the fear of missing out on a rally.
These rules provide a framework for risk management, not a universal formula for returns. They complement the principles already outlined in the encyclopedia: risk tolerance, diversification, maintaining emergency savings, and determining the portion of capital that can be exposed to risk.
SURVIVAL RULE
Revoke risky approvals, preserve transaction records, verify everything and decide exit rules before emotion takes over.
CURRENT-RULES CHECK
Legal protections, tax rates, reporting duties, deadlines and product rules change by country and over time. Use the jurisdiction labels in this guide and check the linked official source before acting.
- Comment révoquer l'accès d'un contrat intelligent à vos fonds crypto | ethereum.org - https://ethereum.org/fr/guides/how-to-revoke-token-access/
- Comment identifier les jetons frauduleux | ethereum.org - https://ethereum.org/fr/guides/how-to-id-scam-tokens/
- Sécurité sur Ethereum et prévention des arnaques | ethereum.org - https://ethereum.org/fr/security/
- Repères utiles sur les rendements de l’épargne | AMF - https://www.amf-france.org/fr/espac...reperes-utiles-sur-les-rendements-de-lepargne
- FTC - Cryptocurrency scams - United States - crypto scam patterns.
- Investor.gov - Crypto-asset custody basics - United States - custody.
- Taxpayer Advocate Service - Digital assets - United States - digital-asset records and tax.
- FTC - Refund and recovery scams - United States - recovery scams.
- Verification gap: No separate English-language source was used to prove the France-specific crypto-tax figures. The original French official source is preserved; verify the current tax year before acting.
