Since the Consumer Protection Watchdog warned of an uptick in scams around cryptocurrency, Australians have lost more than $100 million to scammers, according to new reports.
The ACCC in August warned that investment scams reported to Scamwatch had cost Australians over $70 million in the first half of 2021, with a significant segment in the crypto space.
It said losses to investment scams involving Bitcoin reached $25.7 million this year, compared to $17.8 million across all of 2020, representing a 44% increase.
Now, the Australian Federal Police (AFP) has revealed that cryptocurrency scams have “exploded” during the pandemic, with new figures from the ACCC showing a 172% increase in losses between January and November, totalling $109 million.
“Criminals are really quick to exploit a crisis,” Australian Federal Police Cybercrime Commander Chris Goldsmid told the ABC.
“We’re also seeing more and more people working from home which presents greater opportunities for criminals to target people.”
Scams have followed a surge in crypto investing
Data from Scamwatch shows a 53.4% increase in reports about investment scams received as of August, up from 3,104 in the first half of 2020 to 4,763 reports so far in 2021.
“Investment scams are more prevalent than ever, and scammers are capitalising on interest in cryptocurrency in particular,” Delia Rickard, deputy chair of the ACCC, said in August, adding that more than half of the $70 million in losses were to cryptocurrency — especially through Bitcoin.
“Cryptocurrency scams were also the most commonly reported type of investment scam, with 2,240 reports,” Rickard said.
The ACCC warned their investigations showed scammers pretend to have “highly profitable trading systems based on individual expertise or through algorithms they developed,” including the use of fake celebrity endorsements to try to enhance their legitimacy.
“Be wary of investment opportunities with low risk and high returns. If something sounds too good to be true, it probably is,” Rickard said.
Risk to retail investors
This year, several cases have highlighted how gaps in the regulation of financial advice — along with content around crypto — on social media have also expanded exposure to risk for retail investors.
Data from Finder shows that around 2.5 million Australians overall started investing for the first time during the pandemic, with many turning to cryptocurrency.
In June, a TikTok influencer was called out for using his platform to promote crypto token Hushcoin to his followers across TikTok, Instagram and OnlyFans, potentially in violation of ASIC rules.
And in August, the Australian Financial Review reported a cryptocurrency investor was suing a New Zealand-based cryptocurrency influencer for half a million dollars, claiming he was misled into investing in a speculative crypto project.
Globally, reports have exposed creators with large followings on platforms like YouTube engaging in ‘pump and dump’ schemes.
Most recently, an ASX-listed penny stock surged after members of two ASX pump and dump groups targeted the stock in groups on Telegram.
In November, the AFP raided the offices of Sydney-based corporate advisory firm EverBlu as part of an ASIC investigation into its possible role in boosting the stock of Australian cannabis company Creso Pharma. The firm has also attracted scrutiny for paying influencers to boost its stock.
On Tuesday, digital currency exchange myCryptoWallet went into liquidation, leaving its customers facing the loss of assets held with the company and further highlighting the risks in the sector’s lack of regulation.
The ACCC said losses to cryptocurrency-related scams were likely to be much higher than the $109 million it had recorded so far this year, as a result of unreported cases by victims too upset or embarrassed to come forward.
Goldsmid said the AFP was increasing its resources to track down the perpetrators.
“We see a range of criminal groups behind these scams, and [many of them] originate offshore,” Goldsmid said.
“We work very closely with our international partners to investigate those matters and share intelligence and evidence with our foreign law enforcement partners to take action.”
He said consumers who realised they’ve been scammed should immediately lodge a case with the government website Report Cyber, which is then sent to police.
“Early reporting is absolutely critical, reporting it to your financial institution or your bank, and then reporting it through Report Cyber increases the chance that money can be recovered and action can be taken by law enforcement.”
On Wednesday, Treasurer Josh Frydenberg will deliver a speech, in which he is expected to reveal a string of regulatory and tax proposals covering digital wallets, the buy now, pay later sector, and even a possible central bank digital currency (CBDC) that the government has said will put Australia at the front of the growing fintech economy.