Collapsed cryptocurrency exchange and brokerage Mine Digital appears to have been a target for criminals exploiting the platform and lax regulation to rip off Australians through sophisticated investment scams.
The platform’s parent company, ACCE, collapsed in September, leaving creditors chasing $16 million. Many of them are crypto investors who had placed funds with the online platform to trade digital coins, but so far, liquidators have only been able to recover assets worth $20,000.
In a silver lining of sorts, scam artists are likely to be the other group bemoaning Mine Digital’s demise.
Correspondence obtained as part of an investigation into investment fraud syndicates show a customer was defrauded by a fake investment business, DHP Consultants, that used accounts on ACCE Australia to convert money into cryptocurrency and send it offshore.
AFR Weekend has previously revealed two other instances of fraud victims’ funds being transferred to ACCE accounts and then offshore: investors who thought they were buying high-yield bonds from reputable money managers such as Citibank, Nomura and IFM Investors, and a self-managed super fund duped by a sham company called 500 Investments.
AFR Weekend does not suggest that the company’s management were aware of or involved in these or any other scams.
In the three cases, fraudsters used realistic situations, such as impersonating officials from high-profile companies or seemingly legitimate businesses, to trick people into handing over identification documents and money.
The rattling of crypto market pillars in 2022, such as the near collapse of the terra luna stablecoin network in June, weeks later the insolvency of major crypto lender Celsius, and the spectacular downfall of Sam Bankman-Fried’s FTX in November, have put tougher laws for crypto firmly in the sights of regulators.
Undeterred by the industry’s identity crisis, criminals have upped their reliance on crypto for offshoring cash with relative anonymity.
This has exposed the industry’s poor risk management and lax regulation, as well as the legacy banking sector’s failure to keep pace with criminals using fraudulent bank accounts.
Australians reported more than $350 million of stolen funds via investment scams in 2022 – up 100 per cent on 2021 – and of that, crypto losses surged 217 per cent to $194 million. But the competition watchdog’s Scamwatch estimates only 13 per cent of people report their losses.
Scammed seeking share, SMSF advice
In the latest revelation linked to Mine Digital, a victim, who declined to be named, had in early 2021 unknowingly transferred about $130,000 to scammers, who were using the Australian Business Number of a legitimate company, DHP Finance, for cover.
After finding the DHP Consultants website via Google, they filled out a form for help with understanding how to run a self-managed super fund.
The victim was sent enrolment forms that collected identification documents, including passport, driver’s licence and Medicare details that they believed were necessary for setting up an initial investment account.
The victim had multiple phone calls with fraudsters posing as brokers who persuaded them to hand over cash to invest in shares such as Qantas and COVID-19 vaccine maker BioNTech. The “brokers” comfortably rattled off up-to-date company news and share price movements.
Instead, according to police correspondence seen by AFR Weekend, the money was put into fraudulently set-up bank accounts using the victim’s identification documents and a dodgy Outlook email address.
After that, the money was used to buy cryptocurrency, held in a digital wallet on the Mine Digital exchange. Analysis of that wallet shows the crypto was then transferred to three separate wallets in three transactions.
The crime was reported to law enforcement where “despite extensive inquiries, it is now suspended pending further information,” a NSW Police spokeswoman said.
Millions flow offshore
That single wallet sent more than $US3.3 million to those same three wallets in 100 transactions between October 2020 and January 2021.
More broadly, it transferred more than $US9 million to a range of other wallets in the same period. This does not mean all that money flowed through Mine Digital, but rather illustrates the scale of just one wallet within a fraud operation in just a few months.
While cryptocurrency transactions are traceable, identifying who is using various wallets is difficult.
Administrator PKF and former Mine Digital executives did not reply to request for comment.
The founder of law firm Duxton Hill, Andrew Tragardh, who is representing the SMSF in its legal battle with Mine Digital, said the law was not moving fast enough to protect victims.
“Like always the law is slow to catch up to technology … crypto is no exception. A licensing regime will help protect consumers, but Australia is at least a year away,” he said.
For the more than 9000 Australians who have reported investment scams to the ACCC in 2022, it’s already too late.