Cryptocurrency scams: Research reveals investment scams on the rise

Experts are warning people to be careful while doing their own research into how to invest their savings, with investment scams involving cryptocurrency on the rise.

No doubt someone has told you of how they, or someone else they know closely, invested a few thousand dollars a couple of years back and are now sitting on a tidy sum.

Or you’ve read the news headlines of crypto billionaires, particularly as the price of Bitcoin soared to heights of $68,000 a coin in November, more than doubling its value in just one year.

Here is a fun little fact: The first retail transaction involving Bitcoin was 12 years ago, in May 2010, and the person sold 10,000 BTC for – wait for it – two pizzas. If that person had kept that Bitcoin and sold it in November, they would have been able to buy 85 million ham and pineapple value pizzas as it would have been worth $680 million.

Crypto opportunities make great headlines. Elon Musk tweets dogecoin – a cryptocurrency that initially started as a joke based on a meme of a dog – and its value suddenly skyrockets.

On the other side of the scale, interest rates have been at record lows and keeping money in the bank may not seem like a smart savings opportunity.

Coupled with this has been a rapid decline in the number of financial advisors in Australia following the Royal Commission into Misconduct in Banking, Superannuation and Financial Services Industry.

Kathy Sundstrom. Picture: Patrick Woods.

A University of New South Wales Business School study in April found there had been a roughly 40% decline in financial advisors on the Financial Adviser Register compared to before the Royal Commission.

This has meant people have begun relying on their own research for their investing their hard-earned life savings.

And criminals have been having a field day.

IDCARE’s specialist Identity Security Operations Centre prepares monthly reports for government and industry, the latest which took a little look at the crypto industry.

It found that cryptocurrency use associated with identity and account exploitation reported to IDCARE has increased by 141% since January 2021.

And this year alone, the ACCC has received over 3000 reports of investment scams involving cryptocurrency with a total financial loss of over $158 million.

But even more worrying (arguably) has been the response victims of these crimes have been able to obtain from the cryptocurrency exchanges.

IDCARE also conducts response plan testing on organisations and governments, to try and gain insight on what it is like for victims of cybercrime when they are looking for help. It showed crypto exchanges score dismally low.

Not only are they notoriously hard to contact, the information provided on their sites is sorely lacking when it comes to fraud, scams and identity protection.

Registration of cryptocurrency exchanges in Australia with a dispute resolution organisation is also optional as they are not classified as a “financial institution”, even though they are handling millions of dollars of funds.

This is not to scare people away from cryptocurrencies. Truth be told, I’ve joined the bandwagon too.

On April 29, I “invested” $1000 in two cryptocurrencies. In less than a month, my “investment” is worth $599. I wasn’t scammed. I just bought at the wrong time and I remain optimistic this will change.

But what can and should change before my little investment is the role cryptocurrency exchanges play in providing support avenues for people caught up in a cryptonightmare.

Kathy Sundstrom is a former Sunshine Coast Daily journalist who now works at identity and cyber support service IDCARE.