A report from the Australian Competition and Consumer Commission (ACCC) has found many Australians fell victim to cryptocurrency scams last year, with approximately AU$2.1 million in losses accrued by those chasing the digital currency dream, or paying a virtual ransom.
In Targeting scams: Report of the ACCC on scams activity 2017 [PDF], the watchdog said the impact on Australians where cryptocurrencies were concerned grew in parallel to the "value" and popularity of the likes of bitcoin in the fourth quarter of 2017.
"Scammers adapt each year and find ways to exploit popular trends, new platforms, new ways of communicating, fad products, changes to legislation, or new investment opportunities," the ACCC wrote.
Between January and September 2017, about AU$100,000 was reported lost per month to scams which had a cryptocurrency angle. However, in the month of December 2017, reported losses to Scamwatch -- the ACCC-run scam notice website -- exceeded AU$700,000.
The average reported loss had also jumped from AU$1,885 in January to AU$13,205 in December, the ACCC reported.
"As the value of actual cryptocurrencies increased, so too did the scam losses in what people thought were real investments," the report continued. "By the end of the year, reports of losses related to cryptocurrencies exceeded AU$2.1 million but as with other scams, this is likely the very tip of the iceberg."
According to the ACCC, examples of cryptocurrency scams in 2017 included fake initial coin offerings (ICOs), which purport to be the launch of a new cryptocurrency.
Other scams, the ACCC said, capitalised on the general confusion about how cryptocurrency works and instead of people discovering how to directly buy cryptocurrencies, many found themselves caught up in what were essentially pyramid schemes.
"A number of reports showed that victims entered into cryptocurrency-based scams through friends and family who convinced them they were onto a good thing, a classic element of pyramid schemes," the watchdog wrote.
"Not all cryptocurrency-related scams involved victims attempting to invest in stocks or initial coin offerings. Many scammers also ask for payment through cryptocurrencies for a variety of scams because it is easier to remain anonymous while receiving payment."
An example is paying ransomware through bitcoin.
In total, the ACCC reported Australians lost AU$340 million to scammers in 2017, the highest loss since stats were recorded.
More than 200,000 scam reports were submitted to the ACCC, the Australian Cybercrime Online Reporting Network (ACORN), and other federal and state-based government agencies in 2017.
Investment scams topped the losses at AU$64 million; while dating and romance scams caused the second greatest losses at AU$42 million.
"Some scams are becoming very sophisticated and hard to spot. Scammers use modern technology like social media to contact and deceive their victims. In the past few years, reports indicate scammers are using aggressive techniques both over the phone and online," ACCC Deputy Chair Delia Rickard said.
According to the ACCC, Scamwatch received almost 33,000 reports of threat-based impersonation scams in 2017. It said over AU$4.7 million was reported lost and more than 2,800 people gave their personal information to these scammers.
"The ATO will never threaten you with immediate arrest; Telstra will never need to access your computer to 'fix' a problem; and Centrelink will never require a fee to pay money it owes you," Rickard continued. "Finally, none of these organisations will ask you to pay using iTunes gift cards."