(Updated Sep 2020)

This article delivers an introduction to Bitcoin scams in general and Bitcoin scams in Australia like the Bitcoin Aussie scam. We focus on providing a history and solid general overview of cryptocurrency scams, both inside and outside of Australia. 

History of Bitcoin Scams

The type of cryptocurrency scam deployed by hackers has evolved over time, taking on many different shapes and sizes. In this next section we will cover everything from cryptocurrency scams in general to cryptocurrency Australia scams as well.

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The Legal History of Bitcoin Scams

The first ever Bitcoin-related securities fraud case took place in the USA. In September 2015, a 33-year old American named Trendon Shavers pleaded guilty to running a massive Ponzi scheme. Through a fraudulent financial institution called Bitcoin Savings and Trust, Shavers promised investors a respectable 7% return weekly. First red flag. 

By September 2012, after just one year in operation, Bitcoin Savings and Trust amassed over 700,000 Bitcoin in total. However, almost half of the investors lost all or part of their money, with Shavers himself running off with approximately 146,000 BTC. The amount that Shavers took off with was about 7% of the total supply at the time.

According to a press release from the USA Attorney’s Office in Manhattan, Shavers was “applying a modern spin to an age-old fraud technique utilising a Bitcoin business to run a classic Ponzi scheme. Shavers raised money in the form of Bitcoins by promising spectacular returns and personal guarantees when all he was really doing was paying back old investors with new investors’ Bitcoins.” 

Shavers was sentenced in July of 2016 to 18 months in prison with 3 years of supervised release. In addition to the prison sentence, Judge Kaplan ordered Shavers to pay USD$1.23 mIllion in forfeiture, and another USD$1.23 million in restitution to the scam’s victims.  

Before we talk about some of the other forms of cryptocurrency scams, let’s focus on cryptocurrency scams in Australia, like the Bitcoin aussie scam. 

Cryptocurrency Scams: Australia’s Bitcoin Aussie Scam and Beyond 

Australia is a hot spot for cryptocurrency, which makes it a natural target for fakers like the Bitcoin Aussie scam. While Australia is home to some of the most well-known cryptocurrency scammers of all time (e.g. Craig Wright), Australia has been relatively safe from scams when compared to some other countries. 

In this next section, we’ll talk about some of the cryptocurrency scams we’ve experienced in the last few years like the Bitcoin Aussie scam. 

According to an article by CoinDesk, cryptocurrency scams have been on the rise in Australia since 2017. In the grand scheme of things, that makes sense as 2017 was a pivotal one for cryptocurrency’s growth across the globe, especially in Australia. 

In that same year, Australians had AU$2.1 million collectively stolen from them through cryptocurrency scams. However, the number of cryptocurrency scams grew even higher in 2018, and reached 674 total. Almost half of those cases took place by people between the ages of 25-35. 

Then in 2019, the number of cryptocurrency scams in Australia skyrocketed to over 1,000 for the first time. The total amount stolen from cryptocurrency scams in Australia reached over AU$21.6 million. The number is expected to grow even higher this year in proportion to the global total. 

Bitcoin Aussie System Cryptocurrency Scam

Of all the cryptocurrency Australia scams, one of the most notorious is the Bitcoin Aussie System. It’s part of a series of scams along with Bitcoin Revolution and Bitcoin Evolution. While the exact numbers are difficult to obtain, it is believed that tens of thousands of dollars have been stolen from unsuspecting Australians hoping to profit from cryptocurrency investment. 

What makes the Bitcoin Aussie System a Scam?

The Bitcoin Aussie System claims to use a cryptocurrency trading bot. This bot is supposedly capable of identifying high value cryptos at low cost, then executing trades with that information. According to their own website, with their system, “You get 99 percent accuracy with your trades. This can protect your investment while providing you with significant returns”. 

A 99% accuracy rate means that it is impossible to lose money, which should immediately send up red flags to anyone considering investing. Not even the most reputable brokerages can promise 99% accuracy. It isn’t possible.

Other Famous Bitcoin Scams: Beyond the Bitcoin Aussie Scam 

Easily one of the most well known Bitcoin scams in history was an infamous scam named Bitconnect. This scam used several marketing events to attract investors in the world of crypto. After being a title sponsor and booth sponsor of different crypto events, the team hosted its own event in Thailand. It was at that event where the famous “BITCONNECT” meme was born on stage through an exciting promotional moment from New York investor Carlos Matos. 

Bitconnect promised a 1% compounded daily return, and a 30-31% monthly return (with a possibility of upwards of 40% monthly). Obviously those types of returns are unsustainable long-term, and should not be promised. 

It was only a matter of time that this cryptocurrency scam built on faulty promises would break. Just as they did to cryptocurrency scammer Trendon Shavers, authorities in Texas and North Carolina issued cease and desist letters. It wasn’t long until the UK authorities quickly followed suit. 

The Case of Kathryn Nguyen 

One of the most notable cryptocurrency scams in Australian history was orchestrated by a 25-year-old Australian named Kathryn Nguyen. She was arrested and sentenced in June of 2020 to 2 years and 3 months in prison for stealing more than 100,000 Ripple (XRP) tokens back in January of 2018. 

According to an August news article, Nguyen and an accomplice hacked into a 56-year-old man’s cryptocurrency account. The pair copied a code for the two-factor authentication from his phone onto hers, giving her total access to the account(s). She managed to loot 100,000 XRP from the man, which was worth about AU$400,000 at the time. The couple quickly traded the Ripple for Bitcoin and cash. When she was caught, Nguyen had a crypto wallet containing 3.8 BTC and a handbag stuffed with AU$60,000.

CryptoMB 

One of the crypto scams Australia has been hit by recently was a scam called CryptoMB. An article from the Guardian published earlier this year reports that CryptoMB snatched thousands of dollars from hopeful Australian investors. 

Claiming to be registered in the Marshall Islands, CryptoMB operated out of a call center based in Kiev, Ukraine. The team used a boiler room sales model to lure victims. Eventually, a company whistleblower contacted a Swedish newspaper to break the story to the press. 

Common Types of Cryptocurrency Scams 

There are many different types of cryptocurrency scams. With over $1.4B stolen in the first half of 2020, cryptocurrency scams have had success in deceiving unsuspecting victims all across the world. From impersonation scams, to fake giveaways, to malware attacks, to ransomware, Bitcoin scams have taken money from thousands of people.

As a cryptocurrency holder, you must maintain digital vigilance. In other words, you must be careful with regard to the risks you’re putting yourself at. That can even mean changing the way you use your computer and smartphone. Simple, everyday mistakes can put thousands of dollars on the line. 

Phishing 

Phishing is when a hacker attempts to get personal information from you by disguising themselves as a third-party agency. 

There can be phishing emails and phishing websites. Oftentimes phishing websites are duplicates (or close to duplicates) of what a real website that you’re familiar with look like. Then the phony phishing website steals login credentials and installs ransomware onto your computer. 

Phishing emails on the other hand are sent by what seems like a company you trust, but the email actually attempts to glean your information. These types of fraudulent emails will supply a link that might trigger a virus download to anyone that clicks on it. Other emails will act as a company you know and trust, and ask you to input some type of personal information in response to the email. 

Mining Scams 

Some crypto scams have slogans like “Industry leading mining pool.” You’ve probably seen the advertisements. Maybe you’ve even had the pleasure of being invited into a mining pool from a shady person at a conference or via Telegram group. 

Mining scams are prevalent across the cryptocurrency industry. Some of these fraudulent scams will promise a return that always seems too good to be true. Don’t believe the hype. Usually when something seems too good to be true, it is

Malware 

Malware is a type of software that is created to cause damage to a network, server, client, or computer. Generally speaking, malware is a term for unwanted software. It is a broad category that includes adware, viruses, and trojans. For example, trojan malware will disguise itself as useful software and lure victims into installation. Once downloaded, malware’s general potential to access sensitive information is endless. 

There have been cases of malware programs changing a Bitcoin address by hijacking the copy and paste function. A hacker can attempt to reroute the Bitcoin transaction into a personal account by switching the Bitcoin wallet address. This is triggered by malware. The risk of downloading malware could be diminished by regularly updating an antivirus program, carefully monitoring downloads, and never opening suspicious attachments or links.

Spyware 

Your information can be sent behind your back without you knowing, and spyware can be responsible for that. Spyware is a type of malware that collects info from your computer and then sends it somewhere without your knowledge. Although there have been efforts to crackdown on privacy from major tech companies, hackers are creative in thinking of new ways to steal from new people. 

Impersonation Scams

Earlier this year, some of the world’s top A-listers like Jeff Bezos, Elon Musk, and Barack Obama had their personal Twitter accounts hacked. The hackers displayed a message that called on people to send cryptocurrency to a specific address with the expectation of getting double the crypto back in return. 

Can you imagine one of these busy billionaires having the time to send all of this crypto back to the individuals sending them crypto? Why would they give away free money in the first place? Right away it sounds like a scam. 

Although it’s not the first time an attack like this has been used, that attack was arguably the most high profile one on Twitter because it involved A-listers. 

The attack led to more than US$110,000 in funds being taken. The Twitter attack had unexpected repercussions, like a weather reporter not being able to broadcast a tornado warning, and involvement from the FBI. Twitter rolled out a brand new API in the aftermath of the attack to better protect its ecosystem from these types of attacks. 

Fake Exchanges and Fake Wallets 

The founders of South Korean crypto exchange Komid were placed in prison by the Supreme Court of Seoul. They were charged with faking the trading volume on their exchange. The exchange was rampant with fake information about token listings. The founders are expected to do a combined 5 years for defrauding thousands of users. However, Komid wasn’t alone in South Korea, its compatriot Coinbit had a reported 99% in fake trading volume. 

Crypto Blackmail Scams

There have been instances where hackers request Bitcoin during a blackmail attempt. Earlier in 2020, the Federal Trade Commission reported that a data breach occurred. The breach’s offenders had been emailing unsuspecting people with a message saying that they had information about visits to “inappropriate” websites. 

Other scams involved people’s personal content. Offenders would say that they had a person’s personal videos and images. The scammers would request payment in Bitcoin or else they would unveil damaging personal content, by sending it to people they know or releasing it on the internet

Fraud Initial Coin Offerings 

Fraudulent ICOs and cryptocurrency listings have targeted users time and time again. Sometimes these fraudulent companies would even employ celebrities as part of the marketing efforts. 

Recently, Rapper T.I. was slapped with a US$70,000 fine for promoting the fraudulent FLiK token. The company’s founder has faced charges alleging he used money from FLiK to buy Ferraris, expensive real estate, jewelry, and other luxury goods. 

Other famous stars such as Floyd Mayweather and Paris Hilton have had their names attached to cryptocurrencies that turned out to be less than stellar. 

The Pump and Dump 

A phrase that may be forever famous in the cryptocurrency world, the pump and dump has led to hundreds if not thousands of price crashes across most of the major coins you see today. 

These pumps and dumps are typically coordinated efforts within a private group of individuals to inflate the price of a token in the short term. The group raises the token price by a tactic such as distributing biased, forward-looking statements. Then, the group lets the market take over, and the market continues to make the price increase, thus believing in the hype. Then the dump begins. 

Frequently Asked Questions

Is crypto a scam? 

No cryptocurrency in and of itself is not a scam. While there are bad actors in any industry, cryptocurrency is no different. Individuals within the industry have exploited innocent people and took their money, but no, that does not make crypto a scam. 

If you were in a situation where someone tricked you out of physical, fiat currency, it wouldn’t make the currency phony. It would reveal the fraud of the person who was behind the malevolent action. 

How to avoid cryptocurrency scams?

To avoid cryptocurrency scams, you must be conservative with the links, emails, and messages you open. You must also be mindful of security certifications of the websites you browse. Remember that a fake website can be an exact duplicate of a regular website you’re used to visiting, and that website will take any personal information you put in, then use it to steal from you. Be vigilant of what you’re opening, and where you’re browsing. 

How cryptocurrency scams work

The way that a cryptocurrency scam like the Bitcoin Aussie System works depends greatly on the type of scam it is. One type of scam could simply be an email from an address that looks like someone you know. Then in the email there could be a link that a person could click on, which would deliver access to all of the information a hacker could ever dream of. 

Other cryptocurrency scams involve actual hacking into the Twitter account(s) of famous people and requesting that money be sent to an address in exchange for more crypto. 

Then there are also crypto scams that work by promising unrealistic returns. Those scams typically charge astronomical fees once the funds are locked in. 

Are cryptocurrency scams illegal? 

Cryptocurrency scams are considered illegal when they break certain laws. For example, Bitconnect was considered to be a ponzi scheme and multi-level-marketing scheme. Due to those reasons and others, the department in the state of Texas that overlooks securities had issued a cease and desist letter to Bitconnect. Even if cryptocurrency scams aren’t illegal themselves, the tactics they deploy are often illegal, and will cause law enforcement officials to focus on them. 

How to identify cryptocurrency scams?

The best way to identify cryptocurrency scams is to take a few extra cautious steps in order to be better prepared to fend off attackers. One of the simplest habits you can start immediately is to stop opening emails that come from addresses you’re unfamiliar with. 

Another way to avoid cryptocurrency scams is to ALWAYS triple check the wallet address you’re sending crypto to. This will help you avoid any malware that manipulates your copy and paste features in order to replace your intended wallet address with a scammer’s wallet instead. 

Lastly, one way to increase your caution is to never respond to emails with your personal information. Hackers often pose as normal entities that will need your password for whatever reason. Don’t trust emails like this! Never give away your password.

Kurt Hogan

Written by Kurt Hogan

Written by Kurt Hogan

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