IFW Global is at the forefront of investigating cryptocurrency scams. Digital and virtual currencies secured by cryptography – cryptocurrencies – have been around for more than a decade now, and people from all walks of life have been legitimately using and trading this new type of currency for great rewards.
Unfortunately, with any new investment opportunity, an influx of investment fraud and scam attempts also arises. In 2018, the Australian Competition and Consumer Commission reported that cryptocurrency fraud had become the second most common type of investment scam affecting Australians.
What Is Cryptocurrency?
Although they're often thought of as a new trend, cryptocurrencies have been in development for a long time. Bitcoin, the most well-known cryptocurrency, was launched in 2009. More than 2,000 cryptocurrencies are active on the international market.
Standard currencies (such as the Australian dollar) are centralised and regulated. These have a middleman (a bank or the government) to keep a record of how much currency is available and who has what. This helps to track fraud attempts, such as counterfeiting.
A cryptocurrency is a peer-to-peer trading system that has no middleman. Instead, all logs are recorded in a 'blockchain'. People who own some of a particular cryptocurrency all keep track of payments and transfers of money. If person A sends a bitcoin to person B, every bitcoin owner is notified. The blockchain speaks to participants' computers, and when they all agree on where the money is, an extra 'block' is added to the chain with updated balances and the whereabouts of the money.
Cryptocurrency Investment Scams
Cryptocurrency investment scams include Initial Coin Offerings (ICOs). These are ways that new cryptocurrencies fund their startup by offering new investors the opportunity to receive coin tokens in return for money. While legitimate ICOs do exist for the development of genuine cryptocurrencies, they are also a favourite mechanism used in cryptocurrency fraud.
Many ICOs are marketed without any real technology or legitimate business plans to back them by individuals or small groups with little to no industry or IT experience. In recent years regulatory bodies have prosecuted scam ICO perpetrators. In 2019, the US Securities and Exchange Commission charged the CEO of a software company worth $42million, for defrauding investors through an ICO.
Cryptocurrency Trading Scams
As with any type of investment, malicious individuals and scam groups have found numerous ways to defraud well-meaning investors out of their hard-earned funds. The cryptocurrency trading market is rife with unregulated brokers who use dodgy tactics to steal investments or fleece investors out of more cash. Often these operatives work from call centres, usually based overseas, by cold calling people with enticing offers and promises of hot tips that will return high dividends.
Facebook Scams, Fake News and Bogus Bitcoins
One example cryptocurrency-related fraud is the advertisements you may have seen on popular social media platforms. These often show up on Facebook using photos of well-known celebrities such as Mel Gibson, to entice people into cryptocurrency investments. These scams are perpetrated by organised criminal gangs across the world, who prey on people’s lack of knowledge in this area.
Have you been involved in a cryptocurrency scam?
Just like many types of investment fraud, cryptocurrency scams are often carried out internationally – sometimes across many jurisdictions. This is to limit and frustrate law enforcement in tracking scammers and to make it harder for investors to reclaim their money.
If located in Australia, these scams should be reported to the ACCC via its ‘report a scam’ page so others can be warned about current scams and they can be disrupted where possible. If you are located overseas, these scams need to be reported to your local authority.
If you think you may have been scammed, it's important to act quickly and get professional help from a private investigation agency. Read IFW Global case studies in our free-to-download ebook, Online Investment Fraud: How to Recover Your Stolen Assets.
If you're the victim of a cryptocurrency scam, we want to help you. Please contact us to discuss your experience with cryptocurrency fraud.