Q A social media influencer I follow is recommending an interesting cryptocurrency investment opportunity. While I’m a big fan of this influencer, I’m a bit cautious about taking financial advice from someone on social media. How would I check if the firm they are recommending is above board?
A You are right to be cautious about taking financial advice from someone on social media, says Michael Kavanagh, chief executive of the Compliance Institute, the professional body for compliance professionals.
He says there has been a notable increase of late in the number of “pop-up” social media adverts featuring fake, AI-generated endorsements from well-regarded and trusted celebrities, he said. And crypto scams are common on social media.
Before putting your money into any investment, find out if you are dealing with a regulated firm and product and what recourse (if any) you have, should things go wrong. To check if an investment firm or broker is regulated by the Central Bank, you can search the Central Bank’s online register, or alternatively, call the Central Bank directly. Only deal with regulated firms, Mr Kavanagh advises.
Even if a firm appears to be authorised, always make sure it is genuine. It’s common for scam artists to pretend to be genuine by “cloning” the appearance of an authorised firm and copying information related to that firm. It is generally advisable to only deal with regulated products too, he says.
Under the Central Bank’s consumer protection code, regulated firms must tell you if a product you are considering is unregulated.
Cryptocurrencies are unregulated, and are not protected by any form of compensation scheme. So there will be no compensation if you lose some or all of your money after investing in cryptocurrency. Cryptocurrency is known for its sudden and extreme price movements, so you could very quickly face significant losses if you invest in crypto and prices then drop, Mr Kavanagh adds.