Cryptocurrency scams targeting Australians as scammers bank more than $100 million
They’re three families, all from different parts of Australia.
They have vastly different backgrounds and financial situations.
But one common thread binds them: they have all been embroiled in scams involving cryptocurrency, the decentralised digital currency.
These scams have crippled their futures, with hundreds of thousands of dollars funnelled into the hands of cybercriminals and lost forever.
Australian Federal Police say cryptocurrency scams have “exploded” during the pandemic, with new figures from the Australian consumer watchdog showing a 172 per cent increase in losses between January and November this year, totalling $109 million.
What is cryptocurrency?
- Cryptocurrency, or “crypto”, is decentralised “digital money”
- There are more than 10,000 cryptocurrencies in use around the world
- The Australian Tax Office estimates up to 600,000 Australians have invested in “crypto-assets”
- Some cryptocurrencies have exploded it value over the past two years
- The technology has been praised for its portability, inflation resistance and transparency
- But criticisms centre on its exchange rate volatility and its susceptibility to illegal activity and scams
“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.”
The scams are run by global syndicates, and the money trail is murkier than ever.
Here are the stories of three victims.
The fake crypto trading platform
Queensland couple Emma Robinson and Hugo de Meira Quintao have long dreamed of buying their own home.
Emma, now 25, started saving her pocket money in primary school, and started investing in Australian shares when she was 18.
At the start of this year they’d saved more than $110,000.
But before diving into the market, Hugo, 24,had been investing in stocks and started looking for other options to increase his initial house deposit.
One day he received an unsolicitedphone call — and that’s when the scam began.
The call was from someone posing as an investment manager from Irish brokerage Druid ICAV, and they offered Hugo shares in Airbnb.
Using its own fake website and investment platform, the scammers had cloned the name and address of Druid ICAV — but Hugo was none the wiser.
Druid ICAV’s activities closely mirrored real-time events, included the initial public offering of a major cryptocurrency exchange.
Hugo initially put in $7,000 to “test out” the trading platform the company was using.
“After the first IPO, our trading platform got updated and it matched all the real world events, so it looked really real, and I believed it,” he said.
The fake platform showed Hugo’s investments rising when in fact he’d simply handed money to scammers.
The Central Bank of Ireland later issued a warning about scammers posing as Druid ICAV, but that came several months after Emma and Hugo invested.
The scammers then offered Hugo fake shares in Coinbase, a well-known international cryptocurrency exchange.
“I read up on it [and] Coinbase had been doing really well, and all the information they gave us mirrored what was happening in real life,” Hugo said.
He said they talked to five different people from what they thought was the company.
“They gave us the registration numbers, and so we googled that and just checked typed in ‘is this a scam?’ That kind of thing, nothing came up.”
After Hugo put money into the Coinbase launch, Emma decided to get on board as well.
“I thought it was all legit as well, and I saw Hugo was doing really well,” she said.
“You hear a lot of success stories with crypto. A lot of people make, you know, 2,000 per cent on their money in a couple of months. It’s not unheard of.
“I initially invested just under $50,000 and and then I ended up putting in another $15,000 as well.”
She said the “brokers” she believed she was speaking to “sounded really confident”.
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“They were patient with us and the fact that we’d had heaps of questions about everything and there was official documentation,” she said.
“It wasn’t like you just randomly sent off some money to a bank account.”
Emma tried to make a third investment in Coinbase shares of $7,000, but the transaction didn’t go through.
She later found out the scammers had closed their accounts.
At the same time, Hugo was beginning to question their investment with the Irish company.
“I said to Emma ‘I’m getting a strange feeling about the way that they’re sounding because of some of their accents,'” he said.
“At one point someone broke [into another] accent and I was like, ‘wait a minute, this is weird’.
“And then I got my family lawyers to help. [They] called the lawyers of the real company.
“And then that’s when they told us that the website we’ve been using isn’t their website.”
Emma never heard from the scammers again.
The couple lost a total of $110,000.
“I think we were really upset and angry at ourselves because we kind of let it happen and we invested so much when we shouldn’t have,” Emma said.
Hugo said he was in disbelief for a week.
“We couldn’t believe it… and then it kicked in.”
The couple documented their experience in a cyber fraud report lodged with police and their banks, but it led nowhere.
“From what we’ve learnt, there’s kind of a loop in the system like the criminals know that once the money is sent overseas, it’s no longer investigated.
“And so that’s why they’re targeting Australians because they know that they can get away with it.”
Australian victims targeted
The Australian Competition and Consumer Commission said losses to cryptocurrency-related scams were likely to be far higher than the $109 million it has recorded so far this year.
Many victims are too distressed or embarrassed to report their experiences.
Police say victims are often lured in by advertisements on social media, filling out their details and unwittingly becoming an easy target.
AFP Cybercrime Commander Chris Goldsmid said his force 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,” he said.
“That’s why 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.”
Adam and the fake account
Adam, which is not his real name, is a 45-year-old father who emigrated to Australia from Poland when he was just 15.
He’s worked for more than a decade as a telecommunications contractor, saving money along the way.
In October last year, he was looking at ways to invest his savings and came across an advertisement on Facebook to invest in Bitcoin — one of the most well-known cryptocurrencies.
He got in touch with a company called StocksCM, who told him that $500 was enough to start trading on the stock market.
The company said it would help him set up a cryptocurrency wallet — which is like a digital trading account — to make the first payment.
The company claimed the wallet would help Adam avoid hefty exchange and money transfer fees.
“I called all the numbers and checked their credentials online, as well as their reviews, and most of them were positive,” Adam said.
After about a week, the trading platform Adam had invested his money in showed his $500 had turned into $1,300.
His account manager, who went by the name of “Alex Smith”, encouraged him to invest $10,000.
“He said, ‘you can see how easy the money is, so in a few months you won’t have to work’,” Adam said.
He was told to set up a second cryptocurrency account, and was then given details to transfer his payment to the company’s crypto wallet.
“They said ‘if the cryptocurrency exchange asks, just say the wallet belongs to you, don’t mention the name of our company'”.
Adam was nervous in the beginning, but the company allowed him to withdraw about $6,000.
Looking back, he said that was a key moment of developing trust with “Alex”, making him think he’d be able to withdraw his earnings.
What came next was a rollercoaster of events and investments, with Adam speaking on the phone to his “account manager” Alex Smith daily.
Alex told him that with each new investment, the company would give him bonus points.
Adam’s bank even tried to stop him transferring deposits to his cryptocurrency accounts.
But “Alex” had a line to spin every time.
“He told me ‘you have to be tough, banks don’t want to release the money, they don’t want you to deal with cryptocurrencies’.”
The big investments came when Alex sold Adam on the promise of Amazon shares going up after Black Friday, as well as Apple shares ahead of the release of the next iPhone.
Then, he was told there was a unique opportunity to invest in shares of pharmaceutical companies Moderna and Pfizer, so he invested more money.
But Adam still hadn’t realised he was trading on an investment platform being manipulated by the scammers.
At times his balance skyrocketed into the millions through a combination of investing and bonus money offered by the company, but Adam was never able to withdraw the money.
As his earnings went down instead of going up, “Alex” assured him all would be fine.
“He said ‘just trust me, it happens all the time in the stock market’,” Adam said
Adam’s manipulated account showed that he’d lost millions from his balance, and he was told his balance was too low to keep trading.
His account manager said if he invested another $100,000, there would be an “opportunity to make his money back” in a few months through the companies developing vaccines.
He borrowed $100,000 from his family, without telling them exactly what it was for.
By then his nerves were frayed, and he tried to use the fake StocksCM trading platform himself.
His account showed that he was making his money back and he wanted to withdraw.
But then the company claimed there had been a security breach in their system, and his account would be frozen.
“Every time he called I was just ‘OK Alex, stop being nice, I’m not going to be nice, where’s my friggin’ money, just transfer my money’,” he said.
“I tried to withdraw, they always refused or cancelled.”
By then, he’d searched harder online and found dozens of negative reviews.
Adam again sent an email to Alex asking what had happened to his money.
Alex replied that someone would call him about the ‘money recovery’ but Adam said he never received a phone call.
He lost $457,000.
Adam said the whole experience — which ran from October last year to April — has taken its toll on him and his family.
He’s now working double shifts to try and make as much money back as he can.
“It’s not only [about] the lost money. It’s your plans for the future.”
“You say ‘OK, why did I do it?’ When you’re losing such big [amounts of] money, it’s an advantage for them because they can control you, because in your head you’re saying you want your money back.”
At the time of publication, it was unclear whether there had been any official warning from Australian authorities about the operations of StocksCM.
After several attempts to contact StocksCM via phone and through their live-chat through their website, the company said “you don’t have an account with us so we can’t help you”.
‘We know where they are’
Australian cybercrime investigator Ken Gamble said he had many clients scammed by StocksCM.
“StocksCM is a very sophisticated group based off shore and we know where they are,” he said.
“We know exactly how they operate.
“And it’s compartmentalised across multiple countries and it is an example of the sophistication of these scams.”
He said he was in the process of building a case for law enforcement to investigate.
“We have to demonstrate how the fraud works and where the fraud is and how the fraud has been perpetrated.
“Once we have that evidence in a presentable format, we will go to law enforcement in multiple countries and we will have those people arrested.”
Melanie and the mystery CoinSpot account
Not all crypto scams work in the same way.
Some scammers are targeting vulnerable Australians — people who don’t even know they’ve put money into the platform.
At just 25, Melanie Chapman was diagnosed with multiple sclerosis.
Now more than 20 years later, she lives a full and independent life, but accepts her mind isn’t quite what it used to be.
Earlier this year a man who called himself Peter and claimed he was from her bank, said there had been a security breach on her bank account and needed access to help her fix it.
Mel’s recollection of the period is hazy, but she said she spoke to the man several times over the course of a few weeks.
She then realised some of her savings had disappeared from a bank account she rarely accessed.
She called her younger brother Sean, her power of attorney, asking for help.
“[I felt] completely overwhelmed,” she said.
Her brother immediately brought up his sister’s bank statements and saw a number of curious transactions.
A $50,000 inheritance from her late mother was gone.
Sean went through her emails and worked out that a cryptocurrency account through Australian-owned company CoinSpot had been established in Mel’s name.
CoinSpot is Australia’s biggest cryptocurrency exchange and gives users access to more than 320 different digital currencies.
The scammers used the CoinSpot account to withdraw Mel’s savings from several accounts she held with the same bank.
“[There were] eight days in a row of them transferring out the $8,000 [just] before midnight, every single night.”
Sean had an IT expert examine Mel’s accounts and worked out what had happened.
“The scammer installed remote access software onto her phone,” he said.
“The scammers sent her a link in an email saying ‘click here, we think you’re being scammed, here we’ll help you’.
“That obviously gave him full access to her email, her bank account. And that’s what allowed them to start the process of stealing her money.”
While the bank was helpful and managed to put a stop to the final transaction of $8,000, Sean is angry with CoinSpot.
He said CoinSpot “stonewalled” his requests for help, and never explained what forms of identity were used to set up the account.
In correspondence seen by the ABC, CoinSpot told Sean they couldn’t access Mel’s account history because of privacy laws, even though Sean was her power of attorney.
“I think with CoinSpot that they really should have the systems in place to protect the most vulnerable in society,” he said.
CoinSpot issued a brief statement to the ABC.
“CoinSpot has contacted Melanie to have a discussion about her situation to see whether we can assist further with recovery,” it said in a statement.
“CoinSpot will continue to work closely with the relevant authorities with respect to any ongoing investigations.”
The company refunded a $600 account fee to Mel, while her bank retrieved $8,000.
But the rest of her money is gone.
“It’s gone into Bitcoin, it’s not coming back.”