Background: Phone Scams That Use Cryptocurrency
As cryptocurrency (virtual currency) has become more widely known, cold calls pitching cryptocurrency investments have been observed again and again. A representative pattern is phishing-style deception: the caller uses sweet talk such as "guaranteed profits," "principal protection," or "a special offer available only now," then has the target transfer funds to a fake exchange or investment platform. Cryptocurrency that has been sent has no counterpart to the account-freeze relief available for bank transfers, which makes recovering the loss extremely difficult. See also How to Spot SMS Scam Messages.
Cryptocurrency prices move sharply, and interest in investing rises whenever a price rally is widely reported. Fraud groups take advantage of that interest and call people who are not familiar with how cryptocurrency works. Because large sums can be moved at once, there is also the risk of severe damage in which retirement funds or savings are lost all at once.
Typical Cryptocurrency Scam Tactics
Phone scams that use cryptocurrency follow several typical patterns. Knowing the tactics lets you recognize a scam while you are still being pitched.
Fake Investment Platform
The caller claims that "our proprietary AI trades automatically and produces profits" or that "the platform guarantees 30% monthly returns," and has the target deposit funds into a fake trading site. The dashboard is made to look as though profits are accumulating, but the money actually flows to accounts controlled by the fraud group. Attempts to withdraw are met with demands for "fees" and "taxes," which extract even more money.
Use of Well-Known Names
The pitch manufactures credibility with lines such as "a famous investor recommends this project" or "a well-known figure has invested in it." Fake advertisements on social media are combined with a phone call that supposedly explains the details. In most cases the person's name is being used without permission.
Gradual Escalation
The target first invests a small amount (tens of thousands of yen) and is allowed to take a real profit, which builds trust. The caller then pushes a much larger investment with "invest more and you will earn more," and contact stops once the target has put in millions of yen. The first profit is paid out of the fraud group's own pocket, which is the structure of a so-called Ponzi scheme.
Multi-Level Marketing Structure
Recruitment is expanded through a multi-level structure: "you get a referral fee for introducing a friend," or "grow your organization and you will earn passive income." This tactic is especially harmful because victims end up becoming perpetrators themselves.
Checklist for Spotting a Cryptocurrency Scam
If you receive a phone pitch about cryptocurrency, use the checklist below to judge whether it is a scam. Even a single match means the probability of fraud is extremely high.
- The caller states flatly that your "principal is protected" or that you "cannot lose": principal cannot be guaranteed on a product whose price fluctuates. Legitimate firms are barred by law from talking that way, so a flat assertion is strong grounds to suspect a scam
- The firm is not registered with the Financial Services Agency: if the name does not appear on the list of registered cryptocurrency exchange operators, offering to buy or sell cryptocurrency in Japan as a business violates the Payment Services Act
- You are told to send funds to an overseas exchange: a request to move money beyond the reach of domestic regulation is a danger signal
- There is a reward scheme for bringing in other people: a scheme built on a multi-level structure is extremely likely to be fraudulent
- Extra payments are demanded before you can withdraw: asking for "fees," "taxes," or a "guarantee deposit" when you try to take out your profit is a hallmark of fraud
- The approach comes through social media or a dating app: a stranger who raises the subject of investing is likely a fraudster. Be aware of the risk of having your phone number hijacked through a SIM swap as well
Legal Points to Keep in Mind
Anyone who buys, sells, or exchanges cryptocurrency as a business in Japan must register as a cryptocurrency exchange operator under the Payment Services Act. Operating without that registration violates the Act, and penalties are prescribed. So if someone whose name does not appear on the Financial Services Agency's "List of Registered Cryptocurrency Exchange Operators" offers to sell you cryptocurrency or asks you to deposit funds, do not go along with it. Note that margin trading in cryptocurrency, and schemes that solicit investment in the form of cryptocurrency, may fall within the scope of the Financial Instruments and Exchange Act.
In addition, a pitch that flatly promises "principal protection" or "certain profits" is the kind of statement that would amount to the "provision of conclusive judgments" prohibited by the Financial Instruments and Exchange Act if it came from a financial instruments business operator, or to the exaggerated advertising prohibited by the Payment Services Act if it came from a cryptocurrency exchange operator. In other words, a properly registered firm does not talk that way. The flat assertion itself is a clue that the caller is not a legitimate operator.
Measures That Prevent Losses
Put the following measures into practice to protect yourself from cryptocurrency fraud.
- Do not respond to investment pitches made by phone: a legitimate cryptocurrency exchange does not solicit investments by telephone
- Check the Financial Services Agency's registration list: confirm whether the firm that called you is registered as a cryptocurrency exchange operator
- Be careful with investment talk on social media and dating apps: treat an investment pitch from a stranger as fraud
- Do not be swayed by a small profit: letting you earn at the start is a tactic for gaining your trust
- Talk to family or friends: do not decide on an investment alone, and listen to someone you trust
- Set up two-factor authentication on your exchange account: this is a basic security step against unauthorized logins
Patterns Seen in Cryptocurrency Fraud
Fraud involving cryptocurrency is an area where the overall scale of the damage is hard to capture in figures. Funds are often sent overseas, and some victims hesitate to report what happened. What follows are the patterns that can be read from public warnings issued by government bodies and from published consultation cases.
- Where the approach starts: a prominent route is a person met through a social media direct message or a dating app who moves the conversation to a phone call or a messaging app
- How the damage grows: being able to withdraw a small amount at the start builds trust, and the target keeps adding deposits
- What triggers doubt: when the target tries to withdraw a substantial amount, an additional transfer is demanded as a "fee" or "tax," and only then does suspicion set in
- Link to the market: when a price rally is widely reported, solicitation calls and advertisements become easier to spot
- Who is targeted: not only older people, but also younger people with little investment experience
Since 2023, the National Police Agency has counted investment fraud and romance fraud that begin on social media as separate categories. Solicitations that invoke cryptocurrency often fall into those categories, and they share a trait: they are not completed by phone alone but are combined with social media or messaging apps. Assume that you can be targeted regardless of your age or investment experience, and prepare accordingly.
How to Spot a Fake Trading Platform
Fake trading platforms run by fraud groups share several characteristics. Checking the points below will help you identify a fake site.
- No registration with the Financial Services Agency: operating a cryptocurrency exchange business in Japan requires registration with the Agency under the Payment Services Act. Doing business without appearing on the registration list violates the Act
- Opaque information about the operating company: the address, the name of the representative, and the contact details are not stated, or the information given is false
- Abnormally high yields are guaranteed: figures detached from reality, such as "30% per month" or "300% per year"
- Withdrawals are restricted: depositing is easy, but withdrawing triggers demands for "fees," "taxes," or a "guarantee deposit"
- Unnatural Japanese: the text reads like machine translation
Laws Relevant to Cryptocurrency Fraud
Fraud involving cryptocurrency can run afoul of several laws. Knowing the legal framework strengthens your ability to see through an improper pitch.
- Payment Services Act: running a cryptocurrency exchange business requires registration with the Financial Services Agency. Unregistered operation is punishable by imprisonment for up to 3 years or a fine of up to 3 million yen. Exaggerated advertising by a registered operator, and representations that create the false impression that profits are certain, are also prohibited
- Financial Instruments and Exchange Act: margin trading in cryptocurrency, and schemes that solicit investment in the form of cryptocurrency, can fall within its scope. A financial instruments business operator is prohibited from asserting that profits are guaranteed, which counts as the "provision of conclusive judgments"
- Penal Code (fraud): obtaining money through a false investment scheme constitutes fraud, punishable by imprisonment for up to 10 years
- Act on Regulation of Receiving of Capital Subscription, Deposits and Interest Rates: receiving investment funds from the general public with a guarantee of principal is prohibited
What to Do If You Fall Victim
If you fall victim to cryptocurrency fraud, file a report with the police and also consult the Financial Services Agency's Counseling Office for Financial Services Users (0570-016811). Preserve everything that can serve as evidence: the wallet address you sent funds to, transaction histories, and any call recordings and messages exchanged with the other party. If you sent money by bank transfer, it is also important to contact the receiving financial institution and ask for the account to be frozen.
When funds were sent as cryptocurrency, the transaction is recorded on the blockchain, so a specialist investigation firm may be able to trace where the money went. Tracing often becomes difficult once an overseas exchange is involved, however, so acting promptly once you notice the loss matters. Consulting a lawyer is also worthwhile, and the Japan Legal Support Center (0570-078374) offers free legal consultations for people in financial difficulty.
Where to Get Help
- Police consultation line: #9110
- Financial Services Agency, Counseling Office for Financial Services Users: 0570-016811
- Consumer Hotline: 188
- Japan Legal Support Center: 0570-078374
- Bank transfer fraud consultation desks at individual financial institutions
As related countermeasures, see also How to Spot Investment Scam Phone Calls, How to Report Phone Scams, and How to Handle Anonymous Calls.