Detective Superintendent Michael Cryan heads up the Garda National Economic Crime Bureau says investment fraud has risen dramatically during the pandemic, with fraudsters zoning in on the growing obsession with cryptocurrency.
AS THE Tinder Swindler continues to rank high in the top 10 of most popular shows on Netflix, the reality is that many people will never meet the fraudster who rips off or financial ruins them.
The perfect storm of Covid and the explosion in online investment products and offers means it has never easier to try and make money.
On the flip side, those same investors could be as easily swindled out of their own money without lifting their head from the same screen on which they watched The Tinder Swindler.
While some make massively successful investments in products such as bitcoin and dogecoin, others are being duped by websites and contacts who initially seem plausible but who end up escaping with vast amounts of money from unsuspecting investors.
Investment research published in September by the Competition and Consumer Protection Commission, resulting from a survey of 1,002 adults across the country, showed that 36% of respondents have an investment product. Of those, 11% holds some kind of cryptocurrency.
The research revealed that investors under the age of 35 years are more likely to hold cryptocurrencies or other forms of crypto-assets, with 18% of those surveyed in the 24 to 35 years age category having invested in cryptocurrency. Just 6% of those aged between 45 and 54 have invested in it, with the figure decreasing to just 1% of investors over the age of 55.
Now, gardaí are training officers to investigate blockchain technology and purchase the IT systems required to trace and examine and analyse blockchains.
Blockchain technology is a secure and decentralised record of transactions, and is most commonly used in the area of cryptocurrency.
Gardaí say that investment fraud has risen dramatically during the pandemic, with fraudsters zoning in on the growing obsession with cryptocurrency. In the 12 months between January 1 and December 31, 2021, there were 234 reports of investment fraud made to gardaí — up from 50 in 2019.
Det Supt Michael Cryan of the Garda National Economic Crime Bureau said: “It rose dramatically last year — it rose 180% in 2020 and a further 67% in 2021. The amount of money stolen doubled in 2020. The amount of money does not always equate with the amount of reports. In 2019 there was about €4m reported stolen, €8m in 2020 and about €12m in 2021. That is a colossal jump.”
He said people can easily get caught online when it comes to investment fraud.
He explained: “One way you can get caught is when you see a pop up ad on social media and you click on it.”
Describing this method as subtle, Det Supt Cryan said that such ads use images of well-known people, with the message that they are investing in cryptocurrency — which some people believe.
Influenced by the advertisement, they end up investing in the belief that the well-known successful person used on the advertisement would not have invested if it was not worth doing so. As a result, they end up losing money in the scam.
People also get duped after a
friend suggests they invest in cryptocurrency — “be it a real friend or be it a romance fraud, social media type friend,” said Det Supt Cryan.
For example, one investigation gardaí carried out centred on a romance fraud in which a man from North Cork was duped into sending thousands of euro by bitcoin to a person he met on a dating site.
The man met a person online who convinced him that she needed money sent to her because of a personal emergency.
The money was initially to be wired through Western Union but the man could not do so because he was not close to a Western Union outlet.
However, the scammer advised the man that he could instead send the money through a bitcoin ATM, and managed to advise him of the location of one of Cork’s few such ATMs.
It is not known if the scammers had local knowledge or found the details of the bitcoin facility online. In many cases, such scams are operated outside of Ireland, making it very difficult to get money back or bring scammers to justice.
The money was not recovered.
In another case reported to gardaí , a 38-year-old male reported being scammed. He told officers that he began engaging online with a woman who told him that she needed money to return home from Mexico. The male sent €3,800 via bitcoin in one transaction, before realising he had been conned.
According to Det Supt Cryan, even people who believe they are investment-savvy can be duped by advertisements they find when looking online for investment opportunities in cryptocurrency.
Gardaí advise people to seek independent legal and financial advice before investing in anything to do with cryptocurrency, because it is not regulated by the Central Bank in Ireland.
As a result, people who invest in it have no consumer protection and no comeback — even if the company they are investing with is legitimate.
Det Supt Cryan says most people have very little knowledge about cryptocurrency, making it more difficult for them to know the difference between legitimate opportunities and scams.
He said: “They think bitcoin is the only one but there are thousands of them. There are certainly people who have made a lot of money on cryptocurrency earlier on.”
He stressed that there are legitimate companies operating in the cryptocurrency sphere. But he said some individuals who have accounts with legitimate companies are using the systems to defraud unsuspecting investors out of large sums of money.
While An Garda Síochána is training officers about the technology behind investment fraud, and educating the public about it, Det Supt Cryan says that legislation is not yet up to speed with online investment scams.
He said: “Even the law probably needs to be updated because the law we have in relation to seizing, for example, talks about bank accounts.” He points out that legislation dealing with fraud was drawn up decades before the arrival of cryptocurrencies.
“The law in relation to sharing and gathering evidence abroad needs updating. It is not designed for online fraud. It is not a criticism — just fact.
In an answer to a parliamentary question recently regarding regulation of cryptocurrency, put down by Fine Gael Dublin Mid West TD Emer Higgins, Finance Minister Paschal Donohoe, said that the Government has been monitoring developments in the sphere of virtual currencies in Ireland and internationally over the past five years.
He added: “It has always been my intention that any regulation in this space would be adequate, proportionate and comprehensive without discouraging innovation.
“Due to the global (or borderless) nature of virtual currencies, the potential threat to monetary sovereignty by virtual currencies like stablecoins, the speed of change and complexity in the technology, and its potential use for illicit transactions, the regulatory response must be a coordinated global effort. Regulatory gaps in the treatment of virtual assets must be identified and addressed across jurisdictions.”
Ms Higgins told the : “We all know about the prevalence of phishing scams and fraudulent phone calls and malicious texts, innovations like online trading and cryptocurrency sales aren’t immune from fraud either.” She has seen a rise in interest among young people, particularly young men, in buying and investing in virtual currencies.
While she believes in a person’s freedom to invest in whatever financial avenue they wish, she said: “It is important that they fully understand the risks involved.
Virtual currencies have no legal tender status in Ireland for payment, and they’re not guaranteed or regulated by the Central Bank of Ireland, and unfortunately this can lead to losing your investment or being the victim of fraud.”
She said that since April 23 last year, the providers of certain services in relation to virtual assets have to meet anti-money laundering and countering of financing of terrorism obligations.
Virtual currency providers established in Ireland are also required to register with the Central Bank.
She added: “Steps are being taken to make people aware of the risks associated with cryptocurrencies but I would welcome a sustained information campaign and visible warnings on all advertisements for virtual currencies.”
In recent weeks, the Central Bank published its Securities Markets Risk Outlook Report, which examines key risks to security markets, and the actions to be taken to address such risks.
Among the products highlighted in the report were crypto assets, which, it said, are “likely to be highly risky and speculative”.
It pointed to a warning from the European Supervisory Authorities in February 2018 that urged consumers to be alert to the high risks of buying and/or holding these instruments, including the possibility of losing all their investment.
The Central Bank report outlined: “In addition, crypto-assets come in many forms but the majority of them remain unregulated in the EU. This means that investors buying and/or holding these instruments do not benefit from the guarantees and safeguards associated with regulated financial services.”
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