Nearly instant wealth with the help of Cryptocurrencies is being advertised, in a sophisticated type of social engineering, to senior citizens. As Nordic countries keep public records of age, addresses, phone numbers and information if individuals share the property, spotting the potential victims does not require a high level of sophistication.
From a macroeconomic perspective, the scammers increased their activities after Sweden’s Central Bank Riksbank has indicated by the end of October 2019 to potentially move back to “zero”, after holding onto a negative interest rate, with ultra-loose monetary policy for the last five years in Sweden.
It starts with an email or a phone call, specifying and focusing on negative interest rates on Nordic bank accounts outlining that such negative interest rates combined with a projection of the European Commission of inflation of around 1.3% in Sweden (2019) result in the permanent and ongoing loss of personal wealth. Scammers present themselves as investment advisors, mentioning often even the names of mostly unlicensed investment firms to appear more trustworthy. They often use fake landline phone numbers which appear to be originating from international financial centres like London, Zurich or New York. Afterwards, individuals with fraudulent motivation, focus on growth rates of different cryptocurrencies showing the results from the bull market in 2018 while not mentioning its high degree of volatility.
Victims are being encouraged to try out a potential investment while receiving support from a third-party, claiming to act as an investment consultant or an expert. While reporting any challenges with the usage of computers, understanding the technicalities of a cryptocurrency wallet and its private and public keys, individuals are being offered “additional support” of taking over the computer’s desktop while using the services of remote-desktop-providers like TeamViewer or AnyDesk as to “provide better guidance for the investor”. This is the first fraudulent action request to for example use remote-desktop-providers or registering a cryptocurrency wallet.
Once the individuals have granted access to remote-desktop tools, initial investments are being made with the use of cryptocurrency brokers, usually with a limited amount of transactions. After the initial success and display of the value of cryptocurrency transactions, and potentially some payouts, the individual is gaining trust in the activities of the scammers and is convinced to send in more funds to be granted even greater benefit from the growth of cryptocurrency market.
There are different variations of the scam attempts:
- Individuals are being asked to provide the scammers with full access to their e-identity solutions (or social security number in different jurisdictions) as well as their banking account and to change both their email address and phone number where SMS confirmations from bank transactions arrive. Individuals are being told that only such access to the scammers will allow the biggest returns as sometimes the price can change, and the ‘advisors’ will have to act quickly.
- Individuals are being instructed on how to answer customer service employees or compliance officers who work for cryptocurrency brokers and perform control calls to review the motivation of a significant transaction. Such training features potentially ‘Questions and Answers’ sessions.
- An individual is being asked to send in their cryptocurrencies to a particular cryptocurrency wallet address which has been created and is controlled by the scammers for the individual or to send the funds to the scammers’ wallet address directly. It is usually a case where the scammers are having so-called “private keys” to the particular wallet and transfer the funds to another cryptocurrency wallet to which the scammed individual doesn’t have any access.
Despite state-of-the-art tools, from both the traditional financial providers as well as cryptocurrency providers, individuals tend to mostly willingly participate in such a scheme while being motivated by financial gain. Unless the individual clearly confirms to be using third-party investment support such a transaction remains difficult to spot right away and to trigger begin of the investigation since in many cases the individuals, as mentioned, are driven by greed rather than fear of loss motivation thus they tend to hide the details of the trading process supported by third-parties.
From the Banks’ perspective, the individual transfers a significant amount of funding to a cryptocurrency broker, which exchanges fiat to crypto. From the brokers’ perspective, the users have been identified, provided proof of funds, and even while reaching out to customers in for example a video call form, he or she confirms to perform such transactions autonomously.
Independently of the variation of the scam as the time progresses and the funding disappears, and the victims are not receiving payments on their accounts, the scammers sometimes even get back to individuals under a different name and different company or an institution (such as a with the most imaginary names like:‘Consumer Protection Agency’) with an offer to claim the funds back. Such service is connected with an advanced payment that the victim has to pay into another cryptocurrency wallet. With time, scammers claim that the investigation tends to be more complex and thus more and more parties have to be involved, which creates additional costs.
While reaching out to law enforcement, once the user has triggered payment independently and identified himself or herself by the broker, there is little what can be done outside of reaching out to companies that investigate transactions on the Blockchain. Thankfully, if the victim is lucky and uses registered cryptocurrency most of the brokers can spot transaction patterns and may stop such transactions from being executed.
Moreover, the increase of backend security measures introduced by the brokers, as well as their employees asking more complex questions to the individuals result in more of them simply admitting to using third-party support in trading.Despite both automated and manual measures implemented by different players of the financial ecosystem a blockage of an individual that willingly decides to transfer their savings to cryptocurrency wallet accounts of dubious investment firms that promise significant short time gains is highly unlikely.
As significant gains always equal to significant financial risk and highly profitable low- risk financial products do not exist, the best way to protect individuals from engaging into such scheme is to stay away from it in the first place. It might be worth considering to have a conversation with senior family members as victims being 75 and up years old have not been uncommon. Greed has continued to be a lousy investment for centuries, also in the digital age.