Crypto scam losses total $124m, claims young businessman

A 30-year-old businessman trying to cash in on surging cryptocurrency prices has been conned out of HK$124 million, police say.

Authorities will table within a year an amended anti-money laundering and counterterrorist financing ordinance to the Legislative Council that will extend the supervision of the intermediaries division of the Securities and Futures Commission to platforms selling cryptocurrencies such as bitcoin.

A total HK$214 million from 496 crypto scams was lost in the first six months of the year- compared with 208 scams and a HK$37 million loss recorded in the first half of last year, police said. One case involved the businessman who police said met three fraudsters posing as investment consultants through a friend. He was lured into investing in Filecoin and promised considerable profits.

Between February and April, he deposited HK$124 million into the fraudsters' bank accounts in two installments. In June, he tried to cash out after Filecoin's value dropped from US$168 (HK$1,310) to US$73, but the fraudsters disappeared.

Teenagers have also fallen victim to crypto scams, police said. A 14-year-old secondary student lost about HK$500,000, which he had borrowed from his family. He told police that in March, he saw a post on social media about old banknote acquisitions and subsequently contacted the "buyers."

They said they would pay HK$190,000 for his banknotes, but he would have to help them pay a series of fees first.

The student was instructed to buy HK$8,000 worth of Google Play gift cards and pay a "customs clearance fee" in 12 installments. He was then asked to buy bitcoin for HK$497,500 and transfer them to their e-wallets. They disappeared soon afterward.

Superintendent Fan Chun-yip, of the police force's cyber security division, said fraudsters have favored crypto transactions - over bank deposits - in recent years.

Another scam involves fraudsters selling nonmainstream cryptocurrencies with discounts for mainstream cryptocurrencies, Fan said.

Fake investment schemes involving nonmainstream cryptocurrencies launched through an initial coin offering have also emerged.

"Fraudsters persuade victims to trade mainstream cryptocurrencies for these nonmainstream ones, which cannot be pegged to a market price and their values can significantly drop over time," he said. "Victims cannot cash out these nonmainstream cryptocurrencies. Some don't even exist."

Clara Chiu Ka-lai, director of licensing and head of the fintech unit at the commission, said under the Securities and Futures Ordinance, the regulator will only supervise platforms selling at least one type of securities tokens.

Chiu said the amended ordinance, allowing the commission's supervision to be extended beyond such platforms, would take a year or two to be in place.

Cyber security division chief inspector Ip Cheuk-yu said most of the 441 adults it polled early this year had a shallow understanding of cryptocurrencies.

Lee Siu-chui, in charge of the youth crime prevention center at the Hong Kong Federation of Youth Groups, said a working youngster who lost up to HK$100,000 in cryptocurrencies turned to her association for help.

erin.chan@singtaonewscorp.com