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SCAM SPOT: Decrypting crypto scams

11:00am August 28 2023

Bitcoins and other virtual currencies have been around for a while now, but they remain volatile and attract a wide array of views as to their worth and future impact on finance. It’s hard for anyone to know where they will ultimately end up.

What I do know is that a growing number of scammers are using crypto as a vehicle for their activities, enticing victims to invest in digital currencies. They have many creative ways of convincing people to make these transactions, and once converted, there is very little chance of getting those funds back.

Investment scams cost Australians $1.5 billion in 2022, making them the biggest source of scam losses.

It’s a common story: victims who searched the internet for investment opportunities, found a helpful broker or adviser who walked them through the process of buying cryptocurrency and then transferred them over to their wealth management platform.

Even customers that were cautious at first were convinced of the investment's legitimacy when they did the following:

1. They loaded a small amount of money,

2. Within a few weeks the value of their investment had grown.

3. They then tried to withdraw that money without any issues.

Scammers know that showing you good returns on small values and giving you access to those returns will convince most people that a platform is both profitable and legitimate. Unfortunately, neither may be true.

When we are concerned about how much cryptocurrency a customer is buying, we ask about the brokers who are helping them. Often, they tell us they are acting alone, and nobody is guiding them.

However down the track, they tell us they did have a broker and were following the instructions of scammers who have an array of elaborate reasons why you should do one thing but tell the bank another. A common one they use is that “the bank will make it hard for you and ask lots of questions, so just tell them you don't have an advisor or tell them it’s for renovations, not an investment."

It’s important to note that there is no legitimate reason to ever lie to your bank about the purpose or nature of a payment.

This type of manipulation isn’t limited to just investment scams, it’s also very common in romance scams.

While banks have risk processes and may ask questions about payments, they will never prevent a customer from sending their money to an alternative investment or competitor product. Banks would only refuse to follow a customer's instruction if they believed the payment was illegal or if you are being scammed. If anybody is telling you to misrepresent a payment verbally or in the written payment description to the bank, they are scamming you. You may even be breaking the law.

Those who don't have a regular financial advisor may confuse a person contacting them about these online or crypto opportunities as their trusted partner. In fact, they are hardly independent and may not be licenced in Australia, or be anything more than a scammer.

Finally, do not use bitcoins or other cryptocurrencies to buy items you can buy with regular currency, such as shares, bonds, term deposits, or Exchange Traded Funds. Even if you’re buying these items offshore, you can fund them all with regular money. Anyone who tells you otherwise is scamming you.

There are a huge number of scams out there using cryptocurrencies with fabled stories of amazing returns to help draw you in. Being aware of this and getting yourself independent advice can save you a whole world of trouble.

For information on the latest scams, go to Westpac's Latest Scams & Alerts info

Ben Young is Westpac’s Head of Fraud and Financial Crime Insights. Ben’s team researches and operates Westpac’s key fraud protection processes for the ~25 million transactions processed each day by the bank, particularly around credit cards, internet banking, branch and applications for credit. Ben has been intimately involved in Westpac’s fraud processes since 2007 and has worked in various data led risk processes since 1997.

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