Canadian Regulators Continue to “Monitor” Crypto Exchanges as Investors Are Scammed

I’m not a fan of crypto but I must admit that those who got in early
did well. Recently Jon Erlichman of BNN Bloomberg noted that  $10,000 invested a decade ago in Bitcoin is now worth $2.1 million. That’s a much better return than Apple, Amazon, Microsoft, Tesla, or anything else you might think of.

And Bitcoin is still doing well. In the past year, it has gained almost 40%, although it is still well down from its all-time high in the fall of 2021.

The problem is that Bitcoin and the other cryptos are part of a largely unregulated business that’s akin to a financial Wild West. And, as Canadian investors are have discovered, it’s a dangerous place to be putting your money these days.

The latest evidence came in a report from the little-known Ombudsman for Banking Services and Investments (OBSI). The report states that crypto complaints were up last year, with the majority of them alleging fraud.

The sparse details were published this month in the 2022 annual report of the Joint Regulators Committee (JRC), which includes representatives of financial regulators across Canada.

“Most of these cases (85%) were related to fraudulent activities whereby the client was coerced or tricked into granting a third party access to the client’s account and crypto assets were transferred to a third-party wallet,” the report said.

“To date, OBSI has observed that despite warnings and fraud reduction steps taken by firms, such instances of fraud continue to be common. The JRC continues to monitor this trend and discuss opportunities for risk reduction, including with OBSI.”

That’s it. The report does not provide any information about how many crypto complaints were received or the amount of money involved. Nor is any plan of action suggested beyond the lame “continues to monitor” statement. Investors are left on their own.

Meanwhile, more crypto dealers are being hauled before the courts on a range of charges. The biggest case, which is now playing out in a New York City courtroom, involves flamboyant ex-billionaire Sam Bankman-Fried. He’s charged with fraud, money laundering, and violating political contributions laws in respect of his FTX cryptocurrency exchange.

Bankman-Fried’s story is a fascinating one and you’ll fine lots of details in the new book Easy Money, which I reviewed here a few weeks ago. He was reputedly one of the major players in the crypto industry, having set up a global empire with FTX that he ran from his mansion in the Bahamas.

In what US National Public Radio described as “explosive” testimony, his former girlfriend and business associate, Caroline Ellison, told the court how the defendant would repeatedly make speculative investments and then divert client’s money to cover losses. The trial continues and anyone who has invested in crypto should be paying attention.

Bankman-Fried is not the only crypto mogul facing legal problems. The U.S. Commodity Futures Trading Commission (CFTC) recently filed fraud and other charges against Stephen Ehrlich, the former CEO of Voyager Digital. He is accused of misleading investors about the risk levels involved in schemes he was promoting,

Voyager promoted itself as a safe haven for crypto assets stored on its platform. Instead, the company, which was once valued at more than US$2 billion, “recklessly” loaned money to several companies that went bankrupt. Voyager Digital is now also bankrupt as well. Its website now serves as a portal for creditors seeking information about when (or if) they’ll get any money back.

According to a report last week in the Wall Street Journal, the U.S. government now holds US$5 in bitcoin. This isn’t because Washington has been speculating in cryptocurrencies. The assets were seized by several government agencies such as the IRS from convicted crypto criminals and illicit companies operating on the dark web, such as Silk Road.

It is estimated the global crypto market is worth at least US$1 trillion. The U.S. is actively moving to combat illegal practices where it has jurisdiction. Europe has created a new regulatory framework for crypto trading that will take effect in December 2024.

As for Canada, our regulators are “monitoring” the situation. While they do, more people are being scammed. CTV National News recently aired an interview with a man who lost about $400,000 when he couldn’t withdraw his money from the cryptocurrency exchange he used. He told CTV he went public
with his story to warn other investors of the dangers involved.

Gordon Pape is Editor and Publisher of the Internet Wealth
Builder and Income Investor newsletters. For more information
and details on how to subscribe, go here.  Follow Gordon Pape on X at and on Facebook.

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