News
FOR IMMEDIATE RELEASE

August 7, 2019

MSC Warns Manitobans to be Wary of Crypto-Hype


Winnipeg -
The Manitoba Securities Commission (MSC) is issuing a warning to Manitobans about high-risk cryptocurrency investing after a Manitoban lost nearly $9,000 to a ‘Bitcoin trading’ company allegedly operating from Talinn, Estonia.

 

The company, 4XFX bills itself as a ‘Bitcoin trading investment’ platform, in addition to other cryptocurrencies and commodities such as gold and crude oil. The company’s website is currently shut down, but not before a Winnipeg man was defrauded of $8,729.
 
Other fraudsters are now targeting the same man.


“Not only was this individual defrauded by 4XFX, but his information is being shared with other scammers to target him again,” says Jason Roy, Senior Investigator with the MSC. “He’s being contacted by companies offering to recover his money for a fee—this is a typical, ‘recovery room’ scam, where a second criminal with knowledge of the first fraud will pretend to help you in order to con you a second time. It’s insidious, and unfortunately it’s not uncommon.”

 

Following an investigation, MSC has released an Investor Alert naming 4XFX, 4XFX.com and GRF Europe OU, which are not, and have never been, registered to trade securities in Manitoba. Regulators in the U.K., Australia, and Spain have blacklisted the same company.

This alert was issued as part of the North American Securities Administrators Association (NASAA) “Operation Cryptosweep” an international crackdown on potentially fraudulent ICOs and cryptocurrency-related investment products, involving more than 40 provincial and state securities regulators in Canada and the United States. MSC is a member of NASAA.

 

This is the second ‘Cryptosweep’ conducted by NASAA since 2018. The recent uptick in the price of Bitcoin this year has increased public interest in cryptocurrencies and given rise to another substantial wave of cryptocurrency-related frauds.

 

A critical component of “Operation Cryptosweep” is raising public awareness of the risks associated with Initial Coin Offerings (ICOs) and cryptocurrency-related investment products, including:

·       Potential for Fraud: Due to their very nature, ICOs are fertile ground for fraud.

·       It’s Volatile: Cryptocurrency prices rise and fall dramatically, often driven only by media hype. There are few constraints on price manipulation.

·       It’s Vulnerable: Online wallet companies and exchanges are susceptible to cybersecurity threats and hacking, putting your deposits at risk.

·       Lack of reliable information: Unlike an Initial Public Offering (IPO), there are no formal disclosure requirements such as who is behind the ICO and how the money raised will be spent.

·       High failure rate: Many ICOs are based on an idea, not a proven business model.

·       Obscurity: It’s hard to make informed decisions about value without financial statements or other traditional assessment criteria to rely on.


MSC suggests investors should make sure they thoroughly understand the details and risks of a potential investment, and
whether it fits with their long-term financial strategy. Even legitimate products can be high-risk, and definitely not suitable for everyone. Take time to do your homework before you invest. Start by checking an individual or company’s registration at aretheyregistered.ca.

 

Attached to this release are the “What is Cryptocurrency?” and “What is an ICO?” infographics, which have more information on how investors can protect themselves from cryptocurrency / ICO fraud. They can also be found here.

 

Members of the public are advised to contact MSC if they believe they have been targeted by any type of investment fraud attempt. MSC’s anti-fraud line is 1-855-FRAUD-MB.

 

The public can also visit recognizeinvestmentfraud.com for more information on common investment frauds and scams.

The Manitoba Securities Commission is a division of the Manitoba Financial Services Agency, a Special Operating Agency of the Government of Manitoba that protects investors and promotes fair and efficient capital markets throughout the province.


Organized in 1919, the North American Securities Administrators Association (NASAA) is the oldest international organization devoted to investor protection. NASAA is a voluntary association whose membership consists of 67 state, provincial, and territorial securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada, and Mexico.

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Media Inquiries:         
Jason Booth, Communications Coordinator, MSC  |  204.945.1660 |  jason.booth@gov.mb.ca