New data from Luno reveals that while crypto-related scams affect less than 1% of the platform’s 14-million customers, scams and fraudulent misrepresentation remain the most prevalent forms of fraud in digital currency.
Customers are defrauded in various ways.
John, a South African man, began chatting to Anna (not their real names) and found that they had similar interests. They were firm friends by the time Anna explained her predicament: she was in jail and needed help to pay for various expenses including attorney fees. John was happy to help. For four and a half years, he sent over 80 transactions to Anna totalling R4-million before realising he had been scammed.
According to Luno’s country manager for South Africa, Christo de Wit, the company handled 516 scam-related customer queries over the past three months.
“When you look at the numbers in the context of 14-million customers, it is very few cases,” he says. “The value of losses varies – John’s case was an extreme one – but for affected customers it can be a massive personal loss.”
De Wit says Luno has implemented fraud detection systems that flag suspicious behaviour and partners with blockchain analytics companies in its fight against crypto crime.
It also warns customers when transactions are potentially suspicious.
“Sometimes customers appreciate the warning, but others don’t heed it,” De Wit says. “It’s a balancing act to protect customers while respecting their autonomy.
“One customer was educated on scams over 10 times in two years and, even after acknowledging being scammed, fell for another scam and lost almost R200 000,” he adds. “The same perpetrators often run different scams on the same person, sometimes over several years – like a customer who fell for a crypto recovery scheme after being scammed.”
More recently, a Luno client lost a significant sum of crypto.
He used the same passwords across all financial platforms. His email account was compromised, which meant that a hacker had gained access to his email and the sensitive information it contained, thereby gaining access to his cryptocurrency account.
“When transacting online, ensure you have taken security measures such as not using the same password across multiple financial platforms and devices,” says De Wit. “Never use the same password on more than one account and implement additional security measures such as two-factor authentication and passkeys. Scammers are smart, don’t give hackers access to your email and passwords.”
Who is most likely to be scammed?
Customer demographics reveal that South African males aged 20 to 40 are most susceptible to crypto scams, followed by women aged 20 to 30, and then females aged 55 and above. In the past three months, Luno noted an even split between South African male and female customers who reported scams to Luno. The data also suggests that victims of fraud are more likely to pursue high-risk investments in the hope of quick returns.
“Many find it hard to resist outsized returns and the possibility of getting rich quickly – a common vulnerability which scammers exploit,” says De Wit.
A growing trend involves customers being used as money laundering mules.
“Money is deposited into the customer’s personal bank account,” explains De Wit. “They retain a small percentage and transfer the rest to their Luno wallet and then distribute it in cryptocurrency, unaware that they are being used to launder money.”
Other incidents involve phishing, the impersonation of Luno staff, or financial advisors promising guaranteed returns, as well as technical confusion where customers attempt to send coins to incompatible wallets or networks.
Once cryptocurrency leaves a wallet it is generally irretrievable due to the decentralised nature of blockchain technology. De Wit explains that customers are attracted to crypto because it has no central authority, but this also means there is no safety net – which requires holders to take responsibility for their crypto.