The Facts

Cryptocurrency trader falls victim to scam

During the 2021-2022 financial year, a cryptocurrency trader had a trading account with a financial company. He used the company's platform to transfer bitcoin worth the equivalent of A$119,550 to an organisation called Company K.

The investor was under the illusion that he was transferring money to a legitimate organisation. However, this was not the case. The investor was in fact duped by an initial coin offering (ICO) scam that Company K was running.

Funds disappear and scammers stop responding

After the investor had transferred the funds, they became irretrievable and Company K stopped responding to his communications.

The cryptocurrency trader took the view that the financial firm where he held his trading account should have alerted him to the possibility that Company K was fraudulent and should have prevented the transfer of his bitcoin.

Consequently, the investor argued, the financial firm should compensate him for the $119,550 he had lost.

The financial firm disagreed, claiming it provided appropriate security recommendations to its clients.


The case for the cryptocurrency trader


The case for the financial firm

  • I thought I was transferring bitcoin to a legitimate company.
  • The financial firm had an obligation to act with due care and skill. This includes being alert to the possibility of scams.
  • The transfer represented unusual activity on my account - this was another factor which should have acted as a red flag for the financial firm.
  • If the financial firm had done its job properly, it would have prevented the transfer of my bitcoin to Company K.
  • As it failed to prevent the transfer, the financial firm should compensate me by the amount of $119,550, which represents the value of my losses.
  • Cryptocurrencies are anonymous because of their encrypted nature. This means we cannot identify who owns cryptocurrency addresses and we cannot identify the recipients of cryptocurrency transfers unless they are using our platform.
  • We are not the investor's fiduciary. While we provide an investment platform, it is not our role to give him investment advice or conduct investigations of the investment opportunities he is contemplating.
  • The security warnings we provide to our clients are appropriate and adequate. Specifically, we warn our clients of the dangers of making transfers to recipients they do not know.
  • We do routinely monitor and act upon fraud alerts, such as those provided by, as part of our normal process of conducting our work diligently. Company K was not mentioned in any such alert at the time of the investor's transactions.
  • When the investor asked us about Company K, we told him we had no knowledge of it and advised him to conduct his own due diligence. His failure to do this does not make us responsible for his losses and his complaint should be dismissed.

So, which case won?

Cast your judgment below to find out

Bill Akhurst
Risk management
Stacks Law Firm

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