Does Cryptocurrency Trump Bank Transfers in Trading Frauds?

By Judith Dayan Persson
Vice President of European Operations and Business Development

Australian authorities have confirmed what many experts around the world have suspected for a long time – cryptocurrency is now the method of choice for fueling trading frauds. 

Bank wire transfers were once the preferred payment method of trading schemes in securing funds from clients. Credit cards, in contrast, were seen as a threat to cybercriminals since chargeback protection is a relatively easy way to get money back from a suspected fraud. 

Once the money is sent through a bank transfer, it is hard to recall it without showing evidence that the recipient is engaging in a crime. Still, bank transfers, given the amount of information involved, including the names, locations, and identification of account holders, do not provide sufficient cover for cybercriminals. 

Why Online Criminals Prefer Cryptocurrency to Bank Wire Transfers

Cryptocurrency, with its pseudo-anonymous bitcoin wallets and lack of identifying information on the blockchain, has served as a new haven for trading frauds to the point where digital currency has surpassed bank wire transfers as the method of choice for funding brokerage accounts. In fact, many trading schemes don’t allow other methods–such as credit cards or online payment platforms, to be used by clients to make deposits. 

Cybercriminals are using the presumed anonymity of cryptocurrency as a way to dodge detection. Digital currencies are involved in many of the frauds that have been responsible for the 90% increase in losses to financial schemes in Australia. So far in 2022, Australians have lost $103 million to investing frauds. The  chair of the Australian Competition and Consumer Commission (ACCC), Gina Cass-Gottlieb, confirms that cryptocurrency and not bank transfers are the main method of funding these deals. 

Cass-Gottlieb cites the lack of controls in place as the main reason for the preference for cryptocurrencies. “It’s an unregulated product. There are no controls. There are no institutions that can be roped in to assist. So really, it’s the fact it’s the wild, wild west.” 

Cass-Gottlieb also admits that only 12% of trading frauds are reported, so it may be hard to pin down precise numbers. However, among financial misdeeds reported, more of them are involving cryptocurrency than ever before. 

Multi-Channel Trading Schemes

One of the most challenging aspects of combating crypto fraud is that it is multi-channel. People no longer engage in online trading only by going to a trading website and opening a brokerage account. Although traditional yet fraudulent brokers are still a major threat to consumers, many more of them are being confronted with quick deals through email and WhatsApp spam or social media platforms such as Facebook and Twitter. 

Some even lose money to people they believe are their friends or romantic partners. An online acquaintance can ask for a loan or push an investment deal through cryptocurrency. Often the person making the request cuts off contact and disappears with the crypto funds. 

Cryptocurrency and Trading–Be Careful

So can using cryptocurrency for online trading be safe? Yes, but be sure you take precautions. It is important to remember the following;

Trade only with a regulated broker. Avoid deals advertised on social media and never take advantage of quick trades from email and WhatsApp spam. Research regulated brokers, and choose one that is legitimate and has a strong track record of success. 

Use a legitimate cryptocurrency platform. Cryptocurrency might be considered a wild, wild west, but there are “good sheriffs” out there who will help you screen out cybercriminals and work only with legitimate parties. 

Be careful of brokers that accept only cryptocurrencies. Choose a broker that offers several payment methods. If a broker seems too desperate to accept only digital currencies, that may not be a good sign. 

Seek the assistance of experts if you have lost money to a fraudulent broker. Do not simply give up if your cryptocurrency has gone to a suspicious anonymous bitcoin wallet. The sooner you act, the more likely you can track down your funds. 

MyChargeBack Will Help You Find Your Funds on the Blockchain

If you have lost money to a cryptocurrency scheme, seek fund recovery assistance right away. Consult with MyChargeBack experts and get started with your fund recovery claim. We have extensive knowledge and working relationships with regulators and more than 450 law enforcement agencies around the world, as well as the solutions that can improve your prospects of getting your cryptocurrency back.