Logan Paul Crypto Scam: The red flag signs of a scam everyone should know

It’s been a year since my last article on spotting crypto scams, where I delved deeper into the often murky world of crypto. I’ve previously discussed how the crypto market has its own version of insider trading, namely, someone creating a coin, promoting it to the masses, inflating its price, and then selling it off, causing a crash. Given the recent Logan Paul scandal, this topic has never been more pertinent.

What happened in the Logan Paul crypto scandal?

If you haven’t already heard of Logan Paul, he’s a wrestler and social media star who gained popularity with high-octane and often controversial vlogs on YouTube. The internet star is now facing a potential multi-million dollar lawsuit in the US, after being accused of promoting investment opportunities in crypto coins to his fans, without disclosing he has an invested interest. The allegations suggest that he made over $100,000 in profit from one stock by selling it once the price had skyrocketed.

The internet star has also been forced to apologise for his involvement in a crypto game called CryptoZoo which has been shelved, leaving millions of investors out of pocket.

The Crypto Market and Its Pitfalls

I have no issue with the concept of crypto itself. However, the UK remains largely unregulated when it comes to cryptocurrency. If something goes wrong, you can lose all your money. Additionally, the demographic that crypto targets tends to be young people who are active on platforms like TikTok, Instagram, and other social media sites. These platforms lack rigorous fact-checking mechanisms which leave many users vulnerable to exploitation from scammers (read my previous article on this here). Any existing fact-checking in place on these platforms is also now under threat, given the recent statements made by Meta founder Mark Zuckerberg, and X owner Elon Musk to reduce fact-checking on their social media platforms in a bid to ‘reduce censorship’.

Navigating the Crypto Jungle

So, what are the ways around it? As mentioned, recovering your money from a scam is incredibly difficult. While we lack comprehensive legislation on cryptocurrency in the UK, there are still regulations in place when influencers advertise products online. Currently, this is the only form of regulation we have, and it is simply not sufficient.

When looking to invest in schemes advertised online, it’s important to remember my Investment Red Flags. If a friend or influencer is trying to get you to invest and they say any of the below, then watch out.

1. “We aren’t FCA regulated”

The Financial Conduct Authority (FCA) protect tens of thousands of customers in the financial sector. They protect and regulate companies that run stocks and shares ISAs, pensions, and other investment projects.

Investing or placing your money with a financial firm that has FCA regulation means that your investment is protected if you are mis-sold a product.

Ask and check if the person/company is regulated and always cross-check that with the FCA website.

For more information, visit our article on FCA guidance on social media financial promotions.

2. “We can guarantee you returns that an FCA firm can’t as we aren’t restricted by the market”

This is a huge red flag and is one of the most common ways scammers draw people in – particularly those who are new to the investment world.

The simple fact is, nobody can guarantee returns on investments or guarantee that you won’t lose your money. Live by the golden rule that if it sounds too good to be true, it probably is. 

3. “How I became a millionaire while at home”

A big trend we’re noticing is those taking to social media to brag about how they became millionaires at home by doing “this simple trick.”

The simple trick that’s hidden behind a £1,000 paywall.

These users have no financial background or experience and are simply not qualified to provide you with investment advice. Ask yourself the question, if it was really that simple, why would an apparent millionaire share their tricks of the trade?

4. “There is no contract”

If you’re investing thousands of pounds – you want it written down in a contract!

Many scammers make themselves look legitimate by providing you with wordy and professional-sounding contracts. If a contract has been provided, always get a lawyer to look it over. It may cost you a little in the short term but could save you thousands in the long term – as a lot of our investment fraud clients have learnt.

5. “Your friend did really well with this investment”

While this may not always be a sign that you’re being scammed, one way scammers legitimise themselves is to advertise through your friends. This is how Ponzi/Pyramid schemes continue to be successful even today.

Do not take it for granted that because your friend is making thousands, you will too. Do your own research and form your own opinion, as it could be your money that ends up lining your friend’s pockets.

Conclusion

The Logan Paul scandal serves as a stark reminder of the vulnerabilities in the crypto market. Until robust regulations are in place, it’s crucial to remain vigilant and informed. Stay educated and always exercise caution when navigating the crypto landscape.

Remember the golden rule: if it feels too good to be true, it probably is.

For more information about investment fraud, contact Lauren Steel-Smith via lauren.steel-smith@primaslaw.co.uk.