Investor loses nearly $400,000 in cryptocurrency scam

Mr. F was a healthcare professional and wanted to invest his savings. He was contacted online by someone who claimed to represent online investment company Firm X. The representative said the firm offered investing opportunities with high returns and advisory services to help investors. The representative encouraged Mr. F to use Firm X’s trading platform to invest in cryptocurrency. To open the account, he was told that he would need to invest using bitcoin.

Shortly afterwards, Mr. F opened an online account with a legitimate registered cryptocurrency dealer. Over several weeks, he used its services to convert money from his bank account into the equivalent of bitcoin. When the bitcoin was delivered to Mr. F, he then e-transferred the bitcoin from his crypto account to Firm X’s external e-wallet. Each time he initiated a transfer, the crypto dealer issued automated messages including warnings about common cryptocurrency scams and red flags. Mr. F always clicked on these messages to confirm that he understood and wanted to proceed with the transaction.

While Mr. F continued to rely on the advice of Firm X’s representative, he had grown increasingly concerned about delays with providing him proof of settlement for his investments. A few weeks after his request for the documentation, Firm X’s trading platform and website went offline. Mr. F suspected that he had been scammed and requested that the crypto dealer reverse the last e-transfer of bitcoin he had sent to Firm X’s e-wallet. The crypto dealer told Mr. F that due to the nature of blockchain technology any funds sent to an external e-wallet could not be recovered.

Upset, Mr. F complained that he was a victim of fraud and had lost nearly $400,000 of his savings. He requested that the crypto dealer refund all the money he had transferred since he had been scammed while using its service. The crypto dealer said it was not responsible for Mr. F’s losses because Mr. F had authorized his transactions and indicated that he understood its automated prompts warning him that crypto withdrawals are irreversible, and he should not take advice from or send money to somebody he met online.

Furthermore, the crypto dealer could find no evidence that Mr. F’s account or password had been compromised or unauthorized transactions had taken place. Unsatisfied with the crypto dealer’s response, Mr. F brought his complaint to OBSI.

Complaint not upheld

During our investigation, we reviewed the crypto dealer’s findings about Mr. F’s case and interviewed Mr. F. and a representative of the dealer. We confirmed that Mr. F knowingly and willingly authorized all the transactions in his crypto account and that only Mr. F had access to his account password.

We also found that the crypto dealer had gone beyond its regulatory obligations by issuing warnings to Mr. F about the risks of transferring cryptocurrency to a person he met online. There were no indications of fraud that the crypto dealer should have recognized. While Mr. F was a victim of a serious crime, after completing our investigation we found that his loss had occurred when he authorized the transfer of bitcoin to a fraudulent investment firm and there was no basis on which to recommend that the crypto firm be held responsible.