Many traders believe that cryptocurrency scams are a piece of a bygone age. Unfortunately, however, they are more alive than people realise. Many Australian citizens experienced being scammed out of their funds first-hand in 2018. The hit has been so massive in fact that the ACCC (Australian Competition and Consumer Commission) has reported around a 190% rise in scam activity.
Tried and proven tactics
Many people, not necessarily traders of any financial market, will notice the tactics that these scammers are using. Simple methods of cold-calling people, or marketing their services on shady websites managed to rake in more than $4 million within just one year. Victims were led to believe that the companies required “special” payment methods for their services, such as gift cards and cryptocurrency payments. Thanks to the difficulty (and in some cases impossibility) to track these payments, the scammers are able to get away scot-free from their crimes.
A large target
According to experts at InsideTrade.co, Australians were probably the best target these scammers could have chosen. The relative weakness of the Australian crypto regulations, as well as the surplus in consumer spending, were all the resources needed to execute these scams. However, there is one major plothole to the whole ordeal. Most scammers used to target elderly people, who had very little experience with the digital world. They would use tactics such as Tech Support, investment firms and sometimes even Tax Evasion Fraud. In this case, however, most of the victims (more than half) were between the ages of 25 and 35, which spells trouble for the quality of Australian financial education. Nonetheless, Australia reports a nearly 200% increase in their scam victim indicator.
How were the scams structured?
Most of the scams had nothing to do with cryptocurrency investments, however, they were all using it as a primary method for payments. As already mentioned, thanks to the anonymity of the Blockchain, these transactions are impossible to track and refund. Once a transaction is made with the Blockchain, it cannot be stopped. The only option for remuneration is for the second party to agree. But since all of the “second party” companies were scammers, no “agreeing” was made.
Most of the funds, that were stolen through other means, were funnelled through Western Union, Moneygram and Gift Cards. Yes, gift cards were used to defraud people of their money. What these scammers usually do is, they force their victims to buy gift cards or any other cards that come with unique codes written on them. They force them to read the code out loud and then sell it on the deep web.
How to avoid these scams
Ways to avoiding these types of scams should be common sense, but the scammers are very slippery. They’re always able to overcome some restrictions and introduce new ways of reaching their victims. Therefore a small list of clear “Red Flags” needs to be made.
- If the company is not crypto related, crypto payments need to be avoided.
- There is no legitimate company on this planet that would require payments through gift cards.
- If the company is indeed cryptocurrency related then thorough research needs to be conducted first.
Thorough research means looking through every nook and cranny of the company. The CEO needs to be studied, their history of operations, their white paper as well as previous customer feedback. In most cases, these companies create bots to praise themselves online, therefore most social media websites will not be helpful. The best place to get any significant advice would be Reddit, where pretty much every account is a real person, therefore you’ll get the most truthful feedback there.
Overall, if you ever feel that the company you’re dealing with is a fraud, then they most likely are. All of these precautions need to be made while the AUSTRAC, the country’s financial intelligence agency, and similar agencies abroad are battling the scammers. Overall, no company that does not hold a license should be trusted.
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