
By TERRY PUGH
tpugh@ccgazette.ca
The last few months have seen a sharp increase in the number of sophisticated online frauds involving cryptocurrencies.
The majority of the scams involve cryptocurrency investment schemes, and the losses to victims in this area are adding up to many hundreds of thousands of dollars, according to Warman RCMP Staff Sergeant Jason Teniuk.
“We’re seeing one or two cases a week on average,” said Teniuk. “Sometimes we’ll have weeks with three or four reported cases. Most of the time they involve amounts of between $1500 to $5,000; but it’s not uncommon to see larger sums in the tens of thousands or even hundreds of thousands of dollars.
“The really sad part is that the people who are the biggest victims are the people who worked the hardest to earn that money. They’re losing investments that they were counting on as their nest eggs for their retirement or to pass on to their children and grandchildren.”
Teniuk said most of the victims of bitcoin scams are lured into investment schemes they run across online.
“What happens is they may be on a social media platform like facebook or instagram, and an ad pops up about an investment opportunity that’s really good, but not so good that people don’t believe it.
“Once they get you in, they generally will start out with small amounts of money they ask you to invest, and the amounts you invest keep increasing. They string you along by providing an ‘investment advisor’ that you can talk to online through zoom, and they provide you with an app that supposedly tracks how much money you’re making in real time.
“At that point, people tend to be taken in because it all seems so real.”
Teniuk said eventually, victims realize they’ve been duped when they are unable to cash out their investment.
He said the level of sophistication of cryptocurrency scams is shocking. In one recent case, the online scam used artificial intelligence (AI) to construct a video using the image and voice of multi-billionaire Elon Musk extolling the virtues of a bitcoin investment opportunity, and the excellent dividends it paid.
“It was so well done you couldn’t tell it wasn’t real,” said Teniuk. The technology now is so incredible, and that’s what makes this so much more dangerous.”
Teniuk said the cases are difficult to investigate because cryptocurrency transactions are almost impossible to trace.
Initially, the victim is persuaded to purchase cryptocurrency on the understanding it is being invested in particular companies or initiatives that are realizing above-average returns.
“Once money is converted into bitcoin, it’s really useless at that point,” said Teniuk. “It has to be brought into another platform so it can be cashed out, and there are only a couple platforms that do that. One is called HTX. It’s a Chinese-based company, and what they will do sometimes is they will subcontract or disperse that bitcoin to other countries like Russia or India.
“So, say you invest $100,000 in bitcoin; you convert it into bitcoin at a financial institution or perhaps at a vending machine in a gas station, and that bitcoin you purchased supposedly gets invested. You have your online zoom chats with your ‘financial advisor’ and at this point you’re convinced it’s legitimate. It seems like a good opportunity and you’re provided with charts and updates showing you’re making money.
“But then it comes to the point where you need to cash out some of that money, because that was point of investing it in the first place. And when you do that, you start talking to the people online and either you get a runaround or you only get a very small portion of what you put in – maybe a thousand dollars of the hundred thousand you put in.”
What the scammers have done in the meantime, explained Teniuk, is they have gone to HTX or some other cryptocurrency conversion platform and cashed out the bitcoin for themselves. At that point, it’s virtually impossible for investigators to track down where the money went.
“The conversion process from bitcoin back to tangible cash does take a bit of time, so if investigators can get in early enough there may be a chance, but it is a very complex maze and to have any success, you have to act very quickly.”
Teniuk said HTX is a legitimate cryptocurrency exchange business, but its shady connections to fraudsters also make it suspect.
“They realize they can make money doing a legitimate business, but they also realize they can make a lot more money doing illegitimate business,” said Teniuk. He added that because it is based overseas, HTX is less than enthusiastic in cooperating with Canadian police investigations.
“When we take on an investigation, we’re required by law to follow the law,” said Teniuk. “We have to follow the process exactly and make sure we cross our t’s and dot our i’s. The scammers don’t follow any laws, obviously. So when we’re obtaining information we need to do that through legal channels, and the legal channels available to us may not be recognized in other countries. So we would typically write a warrant to get the information with regards to a particular case where money went into bitcoin, or to HTX. If we wrote a warrant to HTX and said our Canadian court says that you have to disclose all the records with regard to these transactions, HTX may say, ‘we’re in China. We’re not giving you anything;’ or they may not respond at all. At that point we run into a brick wall.”
Teniuk said police have no problem enforcing a warrant at legitimate financial institutions, such as the banks and credit unions based in Canada.
“But when it comes to transferring money overseas, which is what you’re doing when you’re buying bitcoin and going through HTX or similar platform, it’s a completely different story.”
Teniuk said people should be extremely wary about sinking money into any unsolicited investment opportunities that pop up online. Cryptocurrency scams originate with organized crime organizations, and they are siphoning billions of dollars out of the country, he added.
“The complexity and sophistication of these scams is well beyond what we’ve seen in the past,” he said. “This aren’t just obviously-shady phone calls. These are extremely polished and convincing.”
He encouraged the public to consult with legitimate financial institutions or the police before making investments in cryptocurrency online.
“Give us a call,” said Teniuk. “We’re happy to do what we can. We’ve seen a lot of scams and we know what to look for. We would far rather do that than have to start an investigation down the road and have to tell you that unfortunately, we’ve taken our investigation as far as we can and there’s nothing more we can do.”
The Martensville RCMP detachment office number is 306-975-1610 and the Warman RCMP detachment office number is 306-975-1670.