Written by Team Farallon
Cryptocurrencies are not legal tender in Singapore. They do not have intrinsic value and are often subject to sharp price swings driven by speculation. Cryptocurrency providers and exchanges in Singapore are regulated by the Monetary Authority of Singapore (“MAS”) and are subject to anti-money laundering and counterterrorist-financing rules.
Cryptocurrencies are classified as digital payment tokens under section 2 of the Payment Services Act 2019 (the “PSA”). Under the First Schedule of the Payment Services Act 2019, “digital payment token service” includes any service of dealing in digital payment tokens, which is taken to mean the buying or selling of cryptocurrency in exchange for any money. As such, pursuant to section 5(1) of the PSA, cryptocurrencies service providers are required to have an approved license in order to operate in Singapore. It is important to check whether the cryptocurrencies service provider you are dealing with has the proper license, if not, you may be implicated in any potential criminal matters run by them. The punishment for carrying on the business of a payment service without a licence is a fine not exceeding $125,000 or imprisonment for a term not exceeding 3 years or to both.
The rise in popularity of cryptocurrency and misinformation on such products have provided opportunities for con-artists and hackers to perpetrate many different types of scams.
A Ponzi Scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. One of the biggest Ponzi Schemes associated with cryptocurrency is OneCoin, which involved an estimated amount of US$4 billion worldwide. OneCoin’s business model involved restricting trade to an internal marketplace and implementing virtual wallets where monies that have been “exchanged” for OneCoins must be stored. Ponzi Schemes can also go hand in hand with Pyramid Schemes, in which investors are rewarded for recruiting new investors.
The most well-known cryptocurrency is Bitcoin, other popular cryptocurrencies include Ethereum, Litecoin, Ripple and Caradano. A common scam is to present a new cryptocurrency as an alternative to established ones such as Bitcoin, often with the promise of higher returns and lower risks. However, such cryptocurrency simply does not exist, much less traded on a virtual currency exchange. The funds put in by the investors will likely be misappropriated by the scammers for their personal use.
These mobile applications trick users into downloading them by bearing similar names and logos to leading cryptocurrency exchanges. The developer of the application may even describe it as the “official app” for trading cryptocurrencies. However, once installed and registered, the application will steal users’ account credentials followed by their coins. Do not assume that because a mobile application is available for download on the Apple App Store or Google Play Store that it must be safe. Try to click on download links from official exchange or wallet sites rather than risk stumbling upon a fraudulent version within an application store.
Similar to bank-related phishing scams, the scammers will impersonate bank officials or Singapore government officials to contact victims and claim that urgent payment is needed from the victims to resolve issues to their bank accounts. The scammers will then proceed to ask for payment to be made in the form of cryptocurrency. However, legitimate bank officials and government agencies will not ask for cryptocurrency as a mode of payment.
A cryptocurrency scam tend to have the following characteristics:
If you think you have fallen prey to a cryptocurrency scam, you should act as quickly as possible. Due to the nature of cryptocurrency, it is likely that the scammer is not located in Singapore. Furthermore, the more sophisticated the scam is, the more likely that the scammer knows how to cover his/her tracks. To seek advice on your cryptocurrency investments, contact us now for a discussion on your possible legal remedies.
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