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Australian Watchdog Reveals Losses of Over AU$2 Million to Cryptocurrency Scams in 2017

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Australian Watchdog Reveals Losses of Over AU$2 Million to Cryptocurrency Scams in 2017

Cryptocurrency scams were perhaps the most widely reported feature of the digital asset class, apart from their mammoth price increase. Millions of dollars have been fleeced from unsuspecting investors, who needed nothing more than a functional website and a basic whitepaper to consider a project as “trustworthy.”

Scammers Adept At Following Trends

Results from a recent Australian Competition and Consumer Commission (ACCC) report go on to show the extent of monetary losses to scams, with the findings nothing short of startling.

Published on May 21, 2018, the ACCC notes that over AU$2.1 million ($1.58 million) in losses have been accrued by investors looking to make a quick buck, and giving in to “get rich quick” promises.

Furthermore, the watchdog observed that the rise of cryptocurrency as a “trend,” was proportional to the scams involved, citing:

“Scammers adapt each year and find ways to exploit popular trends, new platforms, new ways of communicating, fad products, changes to legislation, or new investment opportunities.”

In the period between January and September 2017, the ACCC calculated a total of AU$100,000 ($75,651) reported lost to cryptocurrency scams, with this period not witnessing a cryptocurrency boom in terms of mainstream media reporting.

The months after September 2017 saw bitcoin’s value surge, with a host of other cryptocurrencies posting impressive returns on a daily basis. The increased activity culminated to a major bull-run in December 2017, with a few cryptocurrencies even paying out 1000x to investors on their initial capital.

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However, the same month saw rampant scams in the sector, with the ACCC noting a total investor loss of $700,000, seven times the losses of the first seven months of 2017, as reported on Scamwatch.

Unsurprisingly, the euphoric period also saw the average loss increase in value – from AU$1,885 in January to AU$13,205 in December.

Fraudulent ICOs Likely a Major Scam Vehicle

The controversial Initial Coin Offering (ICO) was once again at the center of blame as the ACCC’s results proved that fraudulent ICOs caused the bulk of the damage.

The body claimed that under the veil of launching a new cryptocurrency, most ICOs and crypto-startups were essentially pyramid schemes, and capitalized on the public’s naivety of an understanding of cryptocurrencies.

As stated by ACCC:

“A number of reports showed that victims entered into cryptocurrency-based scams through friends and family who convinced them they were onto a good thing, a classic element of pyramid schemes.”

Crypto’s Anonymity Helps Scammers

While the general consensus is that most of the scams involve ICOs and tokens, the watchdog points out that scammers may use payments in cryptocurrencies for a variety of products, without ever intending to sell a physical item.

However, cryptocurrencies still made up for a minuscule portion of total scams, which saw the losses add up to over AU$340 million ($257.2 million).

The ACCC concludes:

“Some scams are becoming very sophisticated and hard to spot. Scammers use modern technology like social media to contact and deceive their victims. In the past few years, reports indicate scammers are using aggressive techniques both over the phone and online.”

 

The ACCC’s report on scams can be accessed here.

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