In a mere 12 months, Aussies lost a minimum of A$180 million to cryptocurrency investment scams, according to figures released in August 2024 by the Australian Federal Police. Across the Tasman, New Zealand’s National Cyber Security Centre (NCSC) reported 1258 cyber incidents in the last quarter of 2024, including more than 500 linked to scams and fraud. Overall, cyber security losses in New Zealand averaged NZ$5.5 million per quarter.

“AUSTRAC intelligence reveals a double-edged trend,” says Australian Transaction Reports and Analysis Centre (AUSTRAC) CEO Brendan Thomas. “While cryptocurrency use for legitimate purposes is on the rise, it’s also being exploited by scammers and money mules.”

Even as crypto adoption accelerates across institutional and retail markets, inadequate safeguards have left the system open to exploitation.

The evolving face of crypto fraud

Fraud has been happening since the stock market began, during the dotcom boom, and again with the rise of forex (foreign exchange) trading. Every wave of financial innovation has been shadowed by opportunistic scams.

“Most scammers are old-fashioned con artists who rely on sleight of hand and psychology,” says Gabby Lewis, head of fraud and financial crime at Swyftx. “They exploit the novelty of new systems and technologies to take advantage of investors.”

“Crypto is present in most scams we see – either as the scam investment or as the payment method for other investments,” says Daniel Trinder, executive director, strategy and design, at New Zealand’s Financial Markets Authority (FMA).

Social media has become the primary entry point. “We see fraudsters appeal to authority by impersonating trusted leaders like police officers or CEOs,” says Lewis. “In chat groups, they’ll showcase fabricated wins and create leaderboard-style environments that pit victims against each other for higher ‘commissions’.”

According to Aaron Lane, senior lecturer at the RMIT School of Law, scammers often strike when victims are emotionally vulnerable. “A person is more susceptible to a scam when they’ve recently experienced an emotional life event that also results in an injection of cash, such as a financial settlement after a divorce, an inheritance after the death of a parent, or access to superannuation after retirement.”

In Australia, crypto ATMs are increasingly used in scam and fraud-related transactions. “Their appeal to criminals lies in their convenience: cash in, with very few questions asked,” says Thomas. An AUSTRAC taskforce found more than 100 such transactions linked to fraud.

Why crypto scams are harder to stop

Scammers have turned crypto’s most promising features into threats. It offers fast, anonymous, irreversible and borderless transactions – traits that fraudsters exploit.

“This is further complicated by the complex and offshore business models of digital asset exchanges,” says Lane. “Even where court orders are obtained, enforcing them across jurisdictions or compelling foreign entities to comply remains difficult.”

The FMA has flagged recent AI-powered scam platforms, including Txex, a WhatsApp-based scam disguised as crypto education, and Zavrox, which offered fake bitcoin giveaways in exchange for upfront fees.

“As crypto is not specifically regulated in New Zealand and international laws vary, you are unlikely to have basic consumer protections when dealing with crypto investments,” adds Trinder.

Turning the tide on crypto scams

This isn’t just a crypto crisis – it’s a test of how governments, platforms and institutions respond to the manipulation of novel technology. The tools to reduce scam-related harm are improving, but the challenge is scale and coordination. “It has become a whole-of-ecosystem responsibility to combat scammers,” says Lewis.

On the regulatory front, AUSTRAC has introduced new conditions for crypto ATM operators, requiring them to report high-risk transactions and conduct extra due diligence. This is part of a broader strategy to limit the avenues scammers rely on to move funds undetected.

Public education is also ramping up. The FMA issues regular scam alerts and works with media to raise awareness, while New Zealand’s NCSC publishes quarterly reports to track threats and share prevention tactics.

“We’re seeing success in surfacing threat patterns and delivering clear guidance through our public reporting,” says Tom Roberts, response and investigations team lead at NCSC. “But the challenge is reaching audiences beyond the digitally engaged.”

Technology may offer the most scalable defence. “AI and machine learning tools are increasingly used by blockchain analytics firms, exchanges, and some law enforcement agencies to flag suspicious patterns of behaviour,” says Lane.

And while scammers exploit crypto’s anonymity at the user level, blockchain transactions are publicly recorded, offering a valuable trail. Combined with better training and advanced blockchain intelligence tools, this is giving law enforcement new ground in the fight against crypto scams.

Take aways

Visit the CA Library to view crypto-related ebooks, such as Jason Scharfman’s two-volume The Cryptocurrency and Digital Asset Fraud Casebook (2023) and Volume II: DeFi, NFTs, DAOs, Meme Coins, and Other Digital.