Bitcoin scam sees man lose nearly half a million dollars, calling banks and exchanges to account

The brother of a man scammed out of more than $400,000 has issued a warning to people to be more aware of bogus bitcoin traders.

Kevin Barraclough, 67, inherited a small fortune when his mother died and thought he would invest it to give the profits back to the community groups he supported.

“I wanted to scoop the money off [the top] and give it to the poor,” he said.

“It was about investing to help other people.”

While scrolling through Facebook late one night Mr Barraclough said he stumbled across a site offering him the chance to make millions of dollars on bitcoin.

He said he typed in his name and phone number “out of curiosity”.

Within half an hour he got a phone call from overseas from a man saying he wanted to do business, and it would only cost him $250.

Mr Barraclough said he foolishly handed over his email address and bank account details to a person he did not know.

“They seemed very convincing, they seemed very personal, very caring,” he said.

An initial $250 transaction was made on February 13 last year, but when Mr Barraclough tried a week later to access his Visa Westpac account it was blocked.

He was called into his local branch in southern Sydney and was told two suspicious transactions of $1,490.39 each were attempted.

Hundreds of thousands gone

Mr Barraclough discussed the transactions with a bank representative who told him the bank believed the transactions were genuine.

The block on his account was removed which gave Mr Barraclough the green light to make dozens 

The next transaction on March 2 was for $7,773.62.

Between April 3 and May 15, Mr Barraclough made a total of 43 transactions for bitcoin via companies with names including Veritex.io, Bluesnow.ou, Simplex-Elastum and Simplex-Bitstamp.

He lost almost all the money, totalling $451,397.41.

According to his brother Alan, Mr Barraclough is a vulnerable, single man living alone who lacks the capacity to assess misinformation and is easily taken advantage of.

He has no expertise in bitcoin trading.

Allan wants to know why his brother did not get a stronger warning from the bank and why more thorough checks were not carried out.

A simple Google search reveals Veritex is based in Estonia and is commonly suspected to be linked to internet scams.

The same applies for Bluesnow, Simplex-Elastum and Simplex-Bitstamp.

Confidentiality is key

Due to confidentiality, the bank refused to discuss any details of Mr Barraclough’s situation but did release a statement in response to an ABC enquiry.

“Westpac invests heavily in scam prevention and has robust processes in place to alert and protect customers,” it said.

Allan has become his brother’s financial guardian.

He said he was furious when he found out what Kevin had done.

But it was already too late.

Allan says he does not accept the bank’s explanation that it was transferring Mr Barraclough’s money to a legitimate company — “a third-party cryptocurrency transfer service” — or the bank’s perceived willingness to protect the transfer service.

“The middleman, who was declared to be just the transfer agency of money, they were found to have done nothing wrong … [but] they wouldn’t give us information on who the scammers were,” Allan said. 

“That was said to be a privacy [issue].

Crypto scams common

The Australian Competition and Consumer Commission (ACCC) received more than 3,000 reports of crypto-currency scams in 2020 with losses approaching $28 million.

Just three months into 2021, losses from cryptocurrency investment scams are already $13.5 million and look to overtake losses from last year.

For Wollongong University privacy and security researcher Katina Michael, the increasing prevalence of digital supply chains makes it very hard to identify who the perpetrators of cybercrimes are.

Furthermore, Professor Michael said the banking royal commission clearly suggested banks needed to do more thorough financial checks.

“Banks will just say they are doing business with a legitimate exchange — it’s the exchange’s fault,” she said.

It was not just the banks that were failing to act, Professor Michael said.

“If a simple search on the internet can identify the potential suspicion of an entity, surely larger players and businesses and platform providers, like Facebook, can actually do better at investigating who is on their customer list, and who they are allowing their customers to transact with,” she said.

“It’s almost [an attitude] like, ‘Let buyers beware’, but [it should be] ‘Banks beware and platform providers beware’ — you have a moral responsibility, if not a legal one.”