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An estimated $100m has been wheedled out of people around the world in a crytocurrency scam run out of a Kiev call centre. We talk to four victims
As a pensioner, Kate couldn’t afford to lose the $4,000 she ploughed into an alleged cryptocurrency scam run out of acall centre in Kiev.
She couldn’t even really afford the initial US$250 she was convinced to invest in website CryptoMB by a man calling himself William Bradley.
“I didn’t have $250 in the first place,” Kate, whose name has been changed, tells Guardian Australia.
“So they said, ‘What have you got?’
“I said I’ve got $150, so they said, ‘Send it through.’”
Kate is just one of thousands of people across the globe victimised by the “boiler room” operation – which involves salespeople making phone calls to potential scam victims from a call centre – exposed today in an investigation conducted by the Organized Crime and Corruption Reporting Project and its media partners, including Guardian Australia.
Total losses wheedled out of victims around the world by a 140-strong team working the phones at the Kiev offices of the company behind the scheme, Milton Group, are estimated to top €60m (A$100m). Milton Group has been approached for comment.
Internal documents supplied by a whistleblower from inside the boiler room to Swedish daily newspaper Dagens Nyheter, which shared the data with the OCCR and outlets including the Guardian, show it had at least 20 Australian customers registered on its books.
Interviews with victims also show that they are sometimes ripped off by multiple internet finance scam operators who use similar techniques but do not appear to have any other links with each other.
Calls to victims seeking more money, often to release illusory profits ginned up by the scammers, have continued as recently as January.
Some Australian victims, like Sydney wedding dress designer Rhonda Rutherford, got off relatively lightly. She invested US$350 (A$530) after getting a call from a woman who was “so lovely, of course”.
“I’ve been totally swindled with bitcoin,” she says.
“I saw Hugh Jackman on television saying that bitcoin was the way to go. I thought I’d give it a flutter.”
Jackman is one of several celebrities whose likeness has been used by scammers to lend legitimacy to their claims.
Rutherford refused to put any more money in but now scammers won’t leave her alone.
“You get calls all times of day and night from all sorts of people,” she says.
The experiences of four Australian victims who spoke to Guardian Australia fits with a pattern reported by Milton Group clients across the world – and by victims of online finance scams in general.
First, victims were asked to make a small investment of a few hundred dollars in cryptocurrencies.
Then they were told that the value of their investments was soaring.
“These profits are amazing,” Kate told a CryptoMB representative who called himself “Colin Taylor” in a WhatsApp message, obtained by Guardian Australia.
Excited, victims try to withdraw their winnings – only to discover all sorts of obstacles in their way.
Obstacles that, they are told, can be overcome by paying even larger sums of money.
Taylor told Kate she could beginning withdrawing money when the balance in her account hit US$10,000.
“And you should know that you have to pay a 20% commission upfront,” he said in a WhatsApp message.
In Kate’s case, this came to A$3,000 – money she told Taylor she borrowed from her son.
“I had to borrow from my son and lie to him, which was not good,” she says.
She said her balance hit US$23,000 and Taylor wanted yet more fees to release the money.
“I ended up putting about A$4,000 in.”
“He just became like a good friend I could talk to.
“It kept going and going and eventually he left the position.”
Taylor, whose name has also been mentioned by overseas victims of the scam, did not respond to questions Guardian Australia sent to the Cyprus phone number he used to exchange WhatsApp messages with Kate.
Another Australian victim tells Guardian Australia he lost about $1,000 through CryptoMB after dealing with someone using the name Colin Taylor – this time, calling from a UK phone number.
He says that after initially depositing $250, he was told his balance had climbed as high as $77,000.
“So I thought I was pretty good, until I tried to withdraw and they wanted commission upfront.
“There was no way I was going to do it, as I had no savings.
“Then the website was gone, what a bummer.”
He says transferring the money wasn’t easy because it required using bitcoin.
Kate also says she paid Taylor in bitcoin, through a service called Coinmama.
Coinmama, which is an Israeli company, said its service was designed to allow people to purchase cryptocurrencies for themselves.
“Since the full spectrum of our services is set up to serve the user and is pursuant to the user’s express instructions, we have no reason to contest the destination address entered by the user,” the company said.
“Unfortunately, if a user chooses to provide Coinmama, as a destination for their purchase, a third party’s wallet address (over which the customer has no ownership nor control), the third party would get the control of the transferred cryptocurrency.”
There is no suggestion the company or anyone working for it had any knowledge of the Milton Group scam.
CryptoMB and its other brands, which included Cryptobase and Vetoro Banc, form just part of a busy ecosystem of fraudulent online investments.
And cryptocurrencies are just the latest in a series of investment products offered by scammers that has previously included futures trading and binary options – bets on whether a share price will go up or down.
Historically, many of the scams have been run out of Israel, which has a booming technology sector.
By 2016, the trade in dubious or fraudulent binary options became so big in Israel that the Times of Israel dubbed its operators “the Wolves of Tel Aviv”.
Embarrassed Israeli authorities have clamped down on the scammers, who have reacted by setting up shop elsewhere in the world.
Whether or not scam operators are related, the techniques they use are similar.
In one case decided by the Australian courts in early February, the Australian Securities and Investments Commission found the operators of binary options site TitanTrade engaged in misleading and deceptive conduct to prey on victims.
The “systemic practice directed to exploiting consumers” it engaged in included being “initially enticed by a number of wins and bonuses” credited to their accounts, but they “quickly began to experience losses, especially after making a request to withdraw their money”, federal court judge Jennifer Davies said in her ruling.
And the experience of one Australian client listed on Milton Group’s database suggests victims tend to end up on lists held by multiple operators.
The victim says one of her other investments was with OT Capital, part of yet another group of companies that, following an Asic investigation, the federal court last week found made false, misleading and deceptive statements to get clients to hand over cash.
But she has had little luck getting money back from any of the online investment platforms she’s tried.
“I’ve got about five companies I’m chasing up,” she says.
The Guardian contacted William Bradley for comment but he didn’t respond by the time of publication.
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