IMPULSE took over as James Gale hit the button to invest £3,000 in what he thought was the presale link to a hotly tipped new cryptocurrency – but in a second the money was gone.
This wasn’t the first – or last – time the 34-year-old was duped out of his hard-earned cash, and sadly it’s a story heard all too often in the world of online assets.
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Last year alone, scammers took home a record £10billion ($14bn) according to data from Chainalysis – a 79 per cent rise from 2020.
Cryptocurrencies – online money that can be used to purchase certain items or services without the need to use real names or go through a bank – dominate the headlines too, with price fluctuations, new coins and even Eric Trump threatening to sue a creator coin for using his family name.
Losing £230,000 to dodgy and bad investments spurred James, from Uxbridge, London, to want to make the online space safer for users.
He launched his own coin – Koda Cryptocurrency – in May last year and now advises about the dangers to be aware of when investing.
From “FOMO” to “apeing”, “rug pulls” and “doxxing”, he also helps decode common crypto terms and how investors can avoid falling foul of cons.
James tells The Sun: “The reason people get scammed, in my opinion, is that everyone has seen the success that can come from a good cryptocurrency and getting in there early.
“If you get in early you stand to earn the biggest gains, which causes mass panic and FOMO – fear of missing out – which leads people to make massive mistakes.
“There’s a thing called ‘apeing’, which refers to an ape-like mentality when going after cryptocurrencies, and that can cost you.
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“It’s when you are not researching a project and go all guns blazing, throwing your money at something when you don’t know what you’re doing.
“I’ve lost up to £30,000 to cryptocurrency scams and £200,000 from coins devaluing, but learned very quickly from my mistakes and have made up the money I lost.
“The one that sticks with me is when I lost £3,000 ($4,000) in seconds. I was so busy and made a move I shouldn’t have.
“I fell prone to scammers because they were running a pre-sale for a cryptocurrency I was following.
“I signed up to the website, put in my wallet address and sent £3,000 but as soon as I hit the button I knew what I had done. It was FOMO and it overrode my emotions and logic.
“As I watched the transaction go through I realised the website was not correct, nor was the wallet. You have to go through those mistakes to learn and educate others.”
Start small
James, who runs one of Britain’s largest pest control companies, started investing in cryptocurrencies back in 2018.
He began investing smaller sums online due to being “too busy” with his other business but eventually put in thousands at a time.
James claims to have had “a few big successes” over the years and now has more than £1.86million ($2.5million) in crypto assets.
This far exceeds the £30,000 he lost to scams – including “being scammed twice for up to £5,000” and others for £1,500 a time – bad investments which saw coins devalue by £200,000.
However, he believes those losses allowed him to learn very quickly what not to do and the red flags to keep an eye out for.
It was this that made him decide to launch his own cryptocurrency – in a bid to make the space safer and more accessible, while also capitalising from potential earnings.
What is cryptocurrency and how does it work?
CRYPTOCURRENCY is online money that can be used to purchase certain items or services without the need to use real names or to go through a bank.
How much coin a person holds, the deals that are made and the fluctuation of a currency’s worth are all recorded on the ‘blockchain’, which serves as a ledger.
The value of a cryptocurrency typically goes up and down based upon supply and demand, dependent on how many transactions are made using the coin and how many coins are made, referred to as mining.
The more useful the coin is seen to be the more it is worth, which is decided based on the number of people who invest in it and the number of transactions that are made using it.
However, the value of a cryptocurrency can also increase if tech figures, such as Elon Musk, talk about a specific coin as they are seen as experts of the online world.
The big players include Bitcoin, Ethereum, Binance Coin and Dodgecoin – but even their currencies’ values have fluctuated over time.
When Koda was launched in May last year the currency was worth $0.0000730 and last week, it was worth $0.00068110, according to CoinGecko.
Like all cryptocurrencies, the value fluctuates by the day but at its peak, it was worth $0.00223939, which was a 2,967 per cent increase from its original value.
Coin copycats & Elon Musk risk
James advises people considering investing in cryptocurrency to “only invest what you can afford to lose”, describing it as a “gambling game”.
He said: “If you’re not going to spend hours or days working out whether a project is worth investing in, it really is like spinning the roulette wheel.”
His greatest pitfalls came after trying spot patterns in cryptocurrencies based on what had done well in the past and following what was current in the news.
James said: “The whole space follows Elon Musk, Dr Dre and other influences, when they talk about a coin it can cause massive price disruption.
Billions and billions of funds are being taken by scams and it’s horrible when you get rug pulled for the first time
James Gale, Koda founder
“It can cause the value to rise crazily high and then dump massively following quotes someone like Elon puts on Twitter.
“I was following his every move on my phone and had thousands ready to put on a coin based on what he said.
“When Elon went on Saturday Night Live dressed as Wario from the Super Mario Bros video game I woke up in the middle of the night and was caught out by a scam.
“Someone set up a scam coin called Elon Wario so I jumped in and put £1,000 into it. Within seconds my money was gone, I had no access to it.”
It was this which inspired James to set up Koda Cryptocurrency. And this week he launches SummitCheck, which helps users analyse their safety of different coins and is tipped to set a benchmark for industry standards.
More transparency
They are encouraging crypto owners to be “doxxed” – meaning their face and identity is publicly linked to the coin – like him, in a bid to make creators more accountable.
It followed being the victim of a “rug pull” which cost him thousands, and James claims it “happens every day”.
James explained: “Projects that are ‘undoxxed’ are the most high risk because they can up and abandon the project whenever they want, taking your money, which is a rug pull.
“A hard rug pull is when the money you invest is there one minute and then disappears the next. A soft rug pull is when it goes down, down and down over time.
“With every rug pull you see it switch into another currency and sent through a number of wallets, before eventually being withdrawn through a bank account.
“Other people are happy to convert it into one coin, like Ethereum or Bitcoin, and are happy to sit on it.
“I’m not aware of anyone getting caught, which is why it’s so rife. People are getting away with it because they are not doxxed.
Squid Game con
“One which hit the headlines was the Squid Game token, which got massive traction because of the TV show with tens of millions invested into it.
“You could see the graph chart going up and up, making money, and then suddenly a massive red line to the bottom when all the funds have been taken out.
“Billions and billions of funds are being taken by scams and it’s horrible when you get rug pulled for the first time.
“You don’t know what to do with yourself, but you learn, adapt and carry on putting into what you know about. The problem is you can never know the mentality of the traders.”
Five risks of crypto investments
THE Sun’s consumer team round up the five major risks of investing in cryptocurrencies:
- Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
- Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
- Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
- Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
- Marketing materials: Firms may overstate the returns of products or understate the risks involved.
Identity theft cons steal thousands
Some conmen impersonate real people and cryptocurrencies in the hope of getting away with people’s funds.
James and his colleagues at Koda, who are doxxed, have been targeted by this as well and are now going through the trademarking process so it’s easier to shut down fake accounts.
He said: “We get loads of people impersonating us on Facebook, and normally the way they try to con people is by offering a giveaway.
“My wife got a message from what seemed to be me saying, ‘Hi can you do me a favour? and she was like, ‘Yeah, what do you want?’
“They said, ‘Can you send me $5,000 (£3,700) and I’ll send it back later?’ – they were clever but not quite clever enough because my wife knows I would never ask that.
“The problem is that they impersonate authoritative people and are successful at it. We’ve had our users being scammed out of their Koda by posing as someone in our support team.
“What I’d warn anyone is, if it seems too good to be true then it probably is.”
Detoxifying the crypto world
James believes so many people fall foul of cryptocurrency scams because they don’t fully understand the space and what to be aware of.
He said: “Without doubt user error because of FOMO is all solved with education and that’s why we’ve set up a trust system to help people work out trusted, credible brands.
“There are so many terms out there that are confusing and at the end of the day it’s a bunch of keyboard warriors talking in their own language.
“The terms are a spin on laziness but they describe things that everyone can relate to if they know them and understand what they mean.”
Social media companies are also cracking down. James said: “Twitter, Facebook and Google are looking to introduce a new verification system around NFTs, non-fundable tokens, and on the blockchain which will help to reduce the scams.
There are so many terms out there that are confusing and at the end of the day it’s a bunch of keyboard warriors talking in their own language
James Gale, Koda founder
“Verification is handy because you can prove ownership to social media platforms and that will make the space more safe.
“I think there will be better regulation in this country as well, I can’t see a future without cryptocurrencies and NFTs.”
The Financial Conduct Authority told The Sun they “regularly warn about investing in cryptoassets” because it typically “involves taking higher risks with investors’ money”.
They launched an Investsmart campaign to highlight the risks of cryptocurrencies and ScamSmart to educate people about the tricks conmen use online.
The FCA added: “If consumers invest in these types of products, they should be prepared to lose all their money and they are unlikely to have access to any redress or compensation schemes.
“We have also seen consumers in the UK increasingly targeted by crypto scams.
“We advise consumers to check if the firm they use is on the FCA’s Register or list of firms with Temporary Registration.”
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