A senior executive at a British investment firm has told how he was scammed out of his life's savings of £300,000 by a cryptocurrency scammer.
Matthew Thomas* says he was “probably blinded by a mixture of greed, curiosity and stubbornness” as he became embroiled in an elaborate and complicated fraud that took place over six months.
The details of his experience, which he shared to help prevent others from being scammed, came as tough new marketing rules for cryptocurrency companies aimed at offering better protection to British consumers came into force on Sunday.
The scam that ensnared Thomas began in January when he was contacted by a friend who had started using a cryptocurrency trading app that he believed was based in the United States.
By July he had lost more than £300,000, some of which (around £60,000) was money he'd taken out on a mortgage, and another £20,000 was money he'd borrowed from work, which he plans to pay back over the next few years. “It all seemed very legitimate at first,” he says. But as time went on, the scammers “[ed] Use the “various levers” to get more money.
Thomas, who is in his 40s, said he was told the trading app's strategy was to buy and sell cryptocurrencies between different exchanges, find price discrepancies and make a profit. Apparently, they had developed an AI bot that would comb the market and jump in when price discrepancies appeared.
Thomas said the strategy “seems too good to be true,” but the opportunity does exist.
He had to set up a cryptocurrency wallet, where users can send, receive and spend cryptocurrencies, deposit cryptocurrency into it and link it to a trading app, so the bot could trade with his balance and he could receive regular updates on the amount of his profits.
At first, Thomas only bet small amounts, but everything worked as promised: he made a profit, sent the funds back to his cryptocurrency wallet, which he was able to convert into pounds and transfer to his bank account.
After a month, he was told he needed a minimum balance of $10,000 (£8,280) to continue. He was happy with that and topped up his balance. “Over the next few months, the account made about 1% a day. I never had a losing day. Everything went as expected,” says Thomas.
He was then told he was eligible to take part in an “airdrop” event — in the crypto world, an airdrop is a marketing strategy in which new coins or tokens are sent to an existing wallet address held by Thomas — in which he was told he would receive additional benefits if he topped up his wallet balance to a certain amount.
He told the trading app's customer service that he was happy to take part in the $100,000 airdrop. – “But instead they signed me up for a $200,000 airdrop,” he said, but was told there was nothing he could do and that he should just complete the airdrop and get his funds and profits.
“At this point, I thought about giving up, but after doing some research, I found out that airdrops are common and that funds are released if certain conditions are met. So I scraped together some savings and completed the airdrop.”
The funds were unfrozen within the app and he was able to withdraw them to his wallet, but then he saw the money just go back into the app.
“I was told I was 'lucky' to have been selected for the increased airdrop of $400,000 and that my participation would earn me even larger rewards. This was done without my own authorization,” Thomas said.
He contacted customer service staff and was told that they had “nothing to do” with this airdrop and that an “AI bot” decided to offer me this airdrop.
“At this point, I truly felt like this was a scam and began to realize how powerless I was…I should have stopped there, but out of my stubbornness, curiosity to see how this would end, or blind faith that I would get my cash back, I did everything I could to replenish with an additional $200,000, which included using all my remaining savings and borrowing from my mortgage and job,” he says.
Two weeks later, he was able to complete the airdrop and hit the “withdraw” button on the app, “but the money never came back into my wallet,” he said.
At this point, customer support staff warned that some of the funds “may be from illegal sources and that the IMF [International Monetary Fund] My funds were frozen…I was told I needed to deposit another 20% to unlock my balance. I was furious.”
He contacted the IMF, who confirmed that they would never be involved in such a thing: “I contacted customer support again and they told me I was wrong and that the IMF was involved, which I knew was a lie.” He reported the trading app to the FBI, and reluctantly concluded that his money was lost.
Then, in July, he received a message from the app's customer support stating that they had partnered with one of the world's most well-known cryptocurrency exchanges, which had apparently enabled him to retrieve frozen funds from a failed airdrop into a cryptocurrency wallet stored at the exchange.
“Was there a light at the end of the tunnel? Or was this another scam? At this point I had given up all my funding so I went along with it,” Thomas said.
He was given account details for a messaging platform so he could communicate with the exchange.
“They probably should have done something simpler,” he said, such as checking whether crypto exchanges were actually using messaging platforms. [which it doesn’t]”But I was so caught up in the fact that I had a chance to get my money back that I didn't notice.”
Over the next 48 hours, he continued to communicate with the person who supposedly withdrew his funds from the trading app, “but the funds were still inaccessible as they were still 'frozen' and a 10% security deposit was required to carry out the unfreezing process.”
His funds were in a separate wallet, away from the trading app's hands. “I was in the final stages,” he said.
So Thomas borrowed the necessary $40,000 and handed it over, but nothing happened. He contacted customer support (which he now knows was fake) and was told the unfreezing process hadn't been successful.
“As you can imagine, I had to deposit another $80,000. At this point I was completely beside myself. You have hope, and when that hope is dashed, you die.”
He reported the scam to various authorities, including the FBI in the US and the UK's National Crime Agency, and also took the matter to the UK's Financial Ombudsman Service.
“I feel relieved now. I was tired of living with this mixture of hope, frustration, anger and disappointment in myself,” he says.
Thomas warns people to be careful about linking their crypto wallets to trading apps: “It's like giving someone your bank account details and saying, 'Make money from my bank account.'”
Meanwhile, the City's regulator, the Financial Conduct Authority, said it “continues to remind people that purchasing crypto-assets remains highly risky and that they should be prepared to lose their entire amount.”
*Not real name
