Social media networks are being used to lure people into a cryptocurrency scam.
A sophisticated social media network is being used to con South Africans by claiming to generate huge returns through trading. The network is made up of 300 fake twitter accounts generating “testimonials” claiming they have made a lot of money.
Jean le Roux, research associate for the Atlantic Council’s Digital Forensic Research Lab, has spent the past few weeks analysing the network.
The cryptocurrency scam started in September 2020 but has become extremely active since January as the bitcoin price increased.
Listen to Maya discussing this topic in the My Money, My Lifestyle podcast.
“I am assuming it is linked to the spike in the bitcoin price,” says Le Roux. “Bitcoin had a large rally earlier this year and this gives them a useful tool to incentivise people to join.”
To date the network has had more than 48 000 mentions and over 26.5 million impressions.
Le Roux explains that the network targets large social media accounts held by media houses, celebrities and influencers, posting testimonials on these timelines.
They make statements such as “Couple of months ago I came across a recommendation about @[user handle] how he helped investors to earn lots of their money with their investments. And I decided to give a trial with the little I have. Now my little something is great which was not my expectation.”
These testimonials are used to drive the potential victim to a main social media account, in this case @DennisWilliam56. This too is a fake account using images stolen off the Instagram accounts of a successful day trader based in the UK.
“They effectively hijack the day trader’s persona, lifting images of him and his graphs from Instagram to make it look legitimate,” explains Le Roux.
Fake testimonials on chat groups
Once the potential victim starts to engage, they are sent to a WhatsApp or Telegram group to be harvested.
Now the cryptocurrency scam takes its full shape as people are lured once again by fake testimonials on these chat groups convincing people to send bitcoin to the scamsters.
28-year old Tshepiso is one of those victims. Between 3 and 8 March 2021, she lost her entire retrenchment package to these fraudsters who used clever psychological tactics to convince her to pay them a total of $6 500 (R98 000) before blocking her and closing down the group.
Tshepiso first came across the Digital Stock Exchange group when a person she trusted told her he had a family member who had made money through them. He sent her the link to join their group on social media platform Telegram.
Once she joined the group, she was asked to directly message someone by the name of ‘Richard Dennis’. He told her he was a trader who could make her a lot of money if she invested $300. He told her to transfer the funds by sending bitcoin through the Luno cryptocurrency platform, providing her with a wallet address.
Luno is one of the leading global cryptocurrency companies where you can directly purchase cryptocurrency with your rands and can make payments from the platform to other wallets – pretty much like a bank account.
The next day ‘Richard Dennis’ contacted her to say her investment was doing so well, she should add a further $700.
The person who had recommended Digital Stock Exchange told her he had a similar experience and believed they would make money, so she made another payment.
Constant requests for additional payments
The following day ‘Richard Dennis’ was again in contact, now requiring a ‘recommitment’ fee of $1 100. This would be a second investment to show she would stay as an investor once they released the profits of the first investment.
Tshepiso paid, but was then told that in order to receive her profits, she had to pay $2 000.
“I told them that this was my retrenchment money, couldn’t they take the $2 000 from my profits to cover these fees? But they said it wasn’t possible and I would forfeit my $20 000 profit if I didn’t pay.”
Although Tshepiso was becoming more concerned, ‘Richard Dennis’ was sending her screengrabs showing investment values with her name, the amount she had invested and that she had a balance of $20 000.
“It all looked so real with graphs and investment amounts,” explains Tshepiso.
Once she paid the $2 000 she was told she could go onto the website where the account was held (ifxtradingsignal.com) and make a withdrawal, however it showed a zero balance. Once again they required more money – this time they needed a $3 400 ‘reflection fee’.
By this stage Tshepiso had already given them $4 100 (R61 500) and although she was increasingly concerned, she believed if she walked away, she would lose everything.
Once she made the $3 400 payment, the funds reflected on the website, claiming $90 000 was owing to her.
However, after requesting the withdrawal on the website, she was given the message ‘pending’. Once again there was a request for more money to release the funds.
At this point Tshepiso told ‘Richard Dennis’ she had run out of all her money and couldn’t pay. He then blocked her from the group.
When she communicated on the “chat” function on the IfxTradingsignal website, asking if she had been scammed, the reply was a laughing emoji. It appears the website is part of the scam and this week the Financial Sector Conduct Authority (FSCA) issued a warning against the website, which appears to be UK based.
“It hurts so much I wouldn’t wish this on my own worst enemy. This was my last money, and when I asked these people if they scammed me, they sent me a laughing emoji. It just shows how ruthless they are, they just don’t care,” says a tearful Tshepiso.
The person who recommended her to the group claims he has also been scammed, also losing $6 500.
The groups simply get closed and then re-opened under new names, including Digital Stock Trade/Crypto, @digitalstockcryptofx and using handles @agent_lincolncharles1 and @lincolncharles1.
Since the warning by the FSCA, they are now sending people to website simplex.com.
As Le Roux explains, the group will show thousands of members but most of them are inactive accounts with a handful of active individuals posting up fake testimonials. The group will last around two weeks, enough to capture some new victims and then simply shut down and start all over again.
In some cases, they may even initially make some payments to gain the trust of people who in turn refer their friends and family.
Le Roux says it is easy to identify these fake Twitter accounts. The testimonials are all cut and paste, down to the same spelling mistakes.
The Twitter accounts show that they rarely create any original tweets on their timelines, only reply to other large Twitter accounts, posting their testimonials.
Lack of understanding by police
In trying to follow up with Luno, Tshepiso was told she needed to go to the police and get a case number. She was told by the police that they have no idea how crypto accounts work, and without a bank account, they couldn’t help her.
Marius Reitz, Luno’s GM for Africa says the lack of understanding by police makes it difficult to form a co-ordinated response to these scams, however, Luno takes proactive steps to identify potential scams and will block payments to wallets that have been flagged.
However, once the bitcoin has been paid out of the Luno platform it is impossible to reverse the transaction. While Tshepiso may never get her money back, by informing Luno as soon as possible, they flagged the wallet address she was given to prevent further transactions.
“Unfortunately, these fraudsters just open new ones,” says Reitz who adds that there are also criminal syndicates who create fake Luno websites or social media pages.
People think they are dealing with Luno but it is actually a fake site. Although payment may be made through your bank’s public recipient details, the wallet address is that of the fraudster. If Luno is notified it can close the wallet, but usually the criminal has transferred the bitcoin out by then.
Reitz says the best way to learn about crypto investing it to open a Luno.com account directly and buy for yourself.
You can even disable the ‘send’ function if your intention is only to hold the investment and not use it to pay anyone.
“Anyone who is offering high, guaranteed returns is running a scam”, says Reitz who adds that no financial institution, whether it is Luno, a bank or an investment manager would ever solicit business by directly targeting you on social media.
“We don’t have salespeople going out to recruit customers or trading for people. If you see people claiming to be a Luno agent, whether it is on social media or a group chat, step away,” says Reitz
Five ways to spot a scam
- Someone contacted me on social media offering me big returns by trading forex, binary options or cryptocurrencies
- My trader is asking for “cost of transfer”, “taxes” or any other fees to access my “profits”
- I’m encouraged to recruit more people into an investment programme as I will earn an income from their investment
- I met someone online romantically and they have asked me to send them money
- Someone famous is giving away cryptocurriences if I send them a small amount first
This article first appeared in City Press.