For almost a decade now, investors have been legitimately using and trading digital currencies secured by cryptography – known as cryptocurrencies – for great rewards. Unfortunately, with any new money-making opportunity comes an influx of fraud attempts. Cue cryptocurrency scams in Australia.

In 2017, $32.5 million in cryptocurrencies was reported lost to the Australian Competition and Consumer Commission (ACCC). This figure has only been increasing since, with losses reaching $148 million in 2022. Now, cryptocurrency scams are the second most prevalent type of investment fraud impacting Australians.

These scammers encourage people to invest in cryptocurrencies with the promise of making a quick buck – and the lack of knowledge about these currencies makes it harder for targets to tell a scam from a genuine opportunity.

Combined with the fact that cryptocurrency transactions have minimal legal and government protections, no centralised authority and are practically irreversible, it’s no wonder crypto scams are particularly appealing to thieves.

Want to invest in a cryptocurrency and keep the wealth in your digital wallet safe?

You’ve come to the right article.

Here, we explain how the most common crypto scams in Australia work, their red flags, protective measures and what to do if you have already fallen victim to this crime.

How does cryptocurrency work?

Despite their perception as a relatively recent fad, cryptocurrencies have actually been around for quite some time. Bitcoin, which is renowned as the most popular cryptocurrency, was introduced in 2009. As of September 2018, more than 2,000 cryptocurrencies are on the international market.

Traditional currencies, like the Australian dollar, are centralised and regulated, meaning there is a central authority, such as a bank or government, that keeps track of the amount of currency in circulation and who owns what. This system helps prevent fraud, like counterfeiting.

In contrast, cryptocurrencies operate on a decentralised and peer-to-peer trading system, eliminating the need for a middleman. Instead, all transactions and records are stored in a public ledger called a blockchain.

Every owner of a particular cryptocurrency maintains a record of payments and money transfers. When person A sends a bitcoin to person B, all bitcoin owners are notified. The blockchain communicates with participants’ computers, and once a consensus is reached on the transaction details, a new “block” is added to the chain, updating the balances and the location of the money.

Where do you store cryptocurrency?

Your cryptocurrency is stored in a digital wallet, either on your computer, hard drive or an online platform. This wallet has a unique wallet address, which tends to consist of a sequence of numbers and letters.

If something happens to your wallet, for example, you can’t remember its password or the online platform it’s stored on stops working, it could be incredibly difficult to recover your funds.

Read on for more risks to be aware of when investing in cryptocurrency.

What are the risks associated with cryptocurrency?

It pays to be aware of the inherent dangers of buying and trading cryptocurrency. Before we even dive into crypto scams in Australia, take some time to familiarise yourself with the critical considerations below.

  • No insurance or government backing: Unlike bank deposits, cryptocurrencies are not insured. If you experience financial issues with a cryptocurrency platform, there won’t be any government intervention to help recover your losses.
  • Volatility: Cryptocurrencies, like Bitcoin, are known for their rapid value fluctuations.
  • Irreversible transactions: Cryptocurrency isn’t backed by any bank, so its transactions can’t be reversed through chargebacks as with a credit card. While some exchanges offer chargebacks for PayPal payments, the return of funds usually depends on the recipient’s willingness.
  • Public identification concerns: The blockchain ledger, which records all transactions publicly, could potentially reveal the identity of cryptocurrency account owners.
  • International transaction issues: Enforcing transactions in overseas disputes can be challenging.
  • Ambiguity: Determining the exact location of a cryptocurrency exchange can be difficult.
  • Insolvency and liquidation: Accessing and recovering cryptocurrency assets in liquidation cases is complex, especially if assets are moved overseas.
  • Private key security: Access to a private key provides unlimited freedom to transfer the cryptocurrency within, so keeping it secure is vital.
  • Lack of legal protection: Cryptocurrency transactions don’t have the same legal protections as credit or debit card transactions if things take a turn.

 

What are crypto scams?

Crypto scams in Australia operate similarly to other forms of financial fraud, except the culprit targets your cryptocurrency instead of your cash.

Ultimately, the aim is to lure victims into sharing personal details or transferring valuable cryptocurrency assets to the fraudster’s account.

Such scammers can achieve this in myriad ways. Read on to discover the most common crypto scams to watch out for in 2024.

Common crypto scams in Australia

 

Phishing

Phishing scams attempt to trick potential investors into giving out personal information. It is a major method by which cryptocurrencies can be lost.

Often, fraudsters send an email designed to look like it has come from a legitimate website that trades in cryptocurrencies. The email directs the recipient to a fake website made to look like the real one in an attempt to gain login details, digital wallets and/or private keys.
 

Malware

Malware, likewise, is likely to target subjects via email, with a file that infects a computer once it is downloaded. The file is likely to have a keylogger that tracks what the recipient types and then sends vital information back to the scammer.

For example, one common type of malware in this space is a fake crypto wallet. These programs infect computers, aiming to steal your private key or password.

Often, the fake crypto solutions promise excessively high returns on investment. You might be required to pay a substantial initial fee and are frequently prompted to invest more.

However, it’s only when you attempt to withdraw your funds that you discover your investments have disappeared.
 

Unregulated brokers

Like any investment, decisions about cryptocurrencies can be made by the investor or through a broker. Legitimate brokers will invest money and charge a small fee for their services. Illegitimate brokers steal investments or try to fleece investors out of more cash.

Crooked brokers operate with fake websites, apps or automated trading systems that invite people to make investments but siphon the money off for their own use.

Alternatively, they might operate from offshore call centres, cold calling targets to make false promises and share ‘tips’ on how to earn significant profits.
 

Romance crypto scams

This form of fraud involves someone posing as a romantic interest online, often constructing elaborate false narratives. Over time, they develop a romantic relationship with the victim, eventually requesting cryptocurrency payments or convincing them to invest in crypto for a shared future.

Ultimately, the romantic relationship is revealed to be a sham, and the person behind it vanishes with your cryptocurrency.
 

Blackmail and extortion

Some fraudsters allege that they have access to compromising personal data, such as private photos or videos. This cruel tactic is used to ensnare victims.

The scammer will demand cryptocurrency payment in exchange for not disclosing the sensitive information.
 

Phoney job offers

In this type of crypto scam, fraudsters craft fictitious job postings or send out unrequested proposals for positions in the cryptocurrency space. Examples include crypto mining or recruiting other crypto investors.

The catch? A cryptocurrency payment is required before you start. The scam then evolves, potentially involving additional payments, or the scammer might deposit money into your account and request a cash transfer back – only for their deposit to ultimately bounce.
 

Fraudulent ‘Investment opportunities’

These crypto scams manifest in various forms, often beginning with someone approaching you with a seemingly lucrative business proposition. They may entice you by claiming they can significantly increase your cryptocurrency holdings, sometimes even claiming to double your investment overnight.

However, it’s crucial to understand that “guaranteed returns” are a fallacy, especially in the realm of digital assets. Avoid anyone promising to rapidly grow your wealth through cryptocurrency investments.
 

Fake giveaways

This scam involves the promise of free money or other prizes in exchange for participation. Scammers often imitate celebrities or influencers to attract unsuspecting victims.

For instance, scammers often pretend to be Elon Musk on social media and videos, enticing people to transfer digital assets with a fake giveaway.
 

Impersonation

Fake giveaways are just one form of impersonation, and there are many other scams of this kind. For example, criminals might claim to represent government or law enforcement agencies to seem credible. They then persuade victims that their accounts or assets are frozen due to investigations, offering a crypto payment as a solution.

Alternatively, they might claim affiliation with major corporations like Amazon, Apple or even your bank. Regardless of the narrative, their ultimate aim is to steal your cryptocurrency.
 

Pump and dump schemes

In this scenario, a group collaborates to attract investment in a specific cryptocurrency, often using social media to generate excitement.

The fraudsters then work together to inflate the asset’s price before collectively withdrawing their investment – leaving new investors with worthless holdings.

Can you get scammed when receiving cryptocurrency?

Yes. It is possible to get scammed by someone who sends you cryptocurrency.

While the transfer itself won’t necessarily enable access to your digital assets, the fraudster might send you cryptocurrency with the ultimate aim of building your trust and stealing your funds.

Once they have established a rapport with you, they might ask you to share personal details or send them cryptocurrency down the line. The key to avoiding this trap? Always be wary of an unfamiliar sender – and never return the favour.

Getting your money back from a crypto scam

The smartest thing you can do when investing in cryptocurrency is to know the warning signs of a crypto scam – and take measures to avoid anything that raises alarm bells.

Red flags of cryptocurrency fraud

Before you invest in any kind of cryptocurrency, watch out for the following warning signs of a scam:

  • Aggressive or unrequested investment tips from strangers
  • Sudden, unsolicited cryptocurrency offers
  • Promotions about ‘free’ funds or unusually high, surefire returns
  • Errors in spelling and grammar in messages
  • Use of intimidation or coercion tactics
  • Crypto job offers demanding advance payments
  • Celebrity endorsements that seem questionable
  • Unclear information about investment operations
  • Crypto platforms that withhold funds for ‘tax purposes’
  • Frequent transactions over a brief period
  • Unexpected tokens appearing in your digital wallet
  • Online romantic interests asking for crypto
  • Requests for crypto in financial transactions
  • Non-listed apps on official app stores
  • Additional payments required to access your funds

How to stay away from crypto scams in Australia

 

Keep your cryptocurrency in cold storage

Store your cryptocurrency somewhere safe. Web-based, mobile, or desktop wallets, known as “hot storage,” are connected to the internet, while “cold storage” options like hardware wallets offer offline security. These hardware devices are kept at home, meaning you can retain direct, physical control over your crypto keys.

You should also avoid all permanent links between your crypto brokerage and traditional bank accounts. That way, even if one account gets hacked, the other is not under threat.
 

Research before you invest

Fraudsters often use aggressive tactics to rush your investment decisions, hindering your ability to do proper homework. Don’t let them stand in the way of your security. Take the time to research reputable companies, like Exodus, MetaMask, Ledger, Trezor, or Bitbox. If you’re in Australia, verifying AUSTRAC registration numbers on digital currency exchanges is a great way to help verify legitimacy.

Even with these precautions in place, you could fall victim to a crypto scam. Keep reading to discover what actions you should take if criminals decide to steal from your digital wallet.
 

Don’t respond to strange communications

If you receive an unexpected email or call about cryptocurrency, it’s likely to be a scam. It’s always wise to ignore messages from unknown sources.
 

Confirm contact details

If you receive communications from your bank or another institution you are familiar with, do not respond directly to the email or phone number from which you were contacted because it could be a crypto scam.

Instead, independently verify the institution’s contact details by visiting their official website. Use that information to call or email them. This will ensure that you are communicating through legitimate channels.
 

Use the internet carefully

Ensure the crypto exchanges and wallets you use are secure by looking for URLs that begin with “HTTPS” rather than just “HTTP”, as this shows that traffic is encrypted.

Additionally, use a private Wi-Fi network whenever accessing your digital wallet. When visiting websites, it’s important to thoroughly check for signs of authenticity, such as accurate and verifiable contact information, proper use of grammar, and realistic offers.

How to report a crypto scam in Australia

If you have already fallen victim to such a scam, it’s worth reporting the crime to local legal authorities. This way, it may be possible to track down the culprit and get your money back.

However, given their online nature, crypto scams often cross borders, spanning several countries and jurisdictions. This global scale makes it challenging for law enforcement officials to locate scammers.

That’s why acting fast in the face of a cryptocurrency scam is crucial.

If you come across any crypto scams in Australia, make sure to report them to the ACCC using their ‘report a scam’ page. This will help to alert others about the scammers and take necessary action against them. You should also notify Australia’s national fraud reporting platform.

Last but not least, do not hesitate to contact the skilled cryptocurrency scam investigators at Bureaus FTC Report. Harnessing decades of experience, our team can leverage sophisticated tracing techniques to reveal evidence that is key to asset recovery.

 

Prosecuting crypto scams in Australia

Want to take legal action against the criminal behind a cryptocurrency scam? Various criminal law provisions may be used to address crypto scams and help recover your losses.

Depending on the circumstances of the fraud, possible offences include:

  • Theft: Illegally accessing and stealing someone else’s cryptocurrency e.g. by hacking into an account.
  • Dealing with proceeds of crime: Involves managing cryptocurrency obtained from illegal activities.
  • AML/CTF law violations: Involves producing fake or deceptive documents under the Anti-Money Laundering And Counter Terrorism Financing Act 2006.
  • Breach of Director’s duties: Whereby a company director has been reckless or deliberately dishonest about failing to fulfil their duties under Section 184 of the Corporations Act 2001.

Have you been involved in a crypto scam in Australia?

Just like many types of investment fraud, cryptocurrency scams are often carried out internationally – sometimes across many jurisdictions. The purpose of this is to restrict and impede law enforcement in their efforts to trace fraudsters and to create obstacles for investors attempting to recover their funds.

If you suspect that you have fallen victim to a crypto scam, take immediate action and seek expert assistance from a private investigation agency. Learn more about our crypto scam recovery services.

Book a consultation now or learn more about our cryptocurrency scam investigation services.

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