Crypto Exchange Halts Withdrawals for Elderly to Prevent Scams

Key Insights:

• Independent Reserve monitors elderly users’ transactions, contacting them directly to prevent potential crypto scams.
• Crypto scams target all age groups, with younger users also at high risk, especially in the UK.
• Lower-income individuals are more vulnerable to crypto scams, driven by the lure of quick financial gains.

Crypto exchanges are increasingly prioritizing customer safety as scams targeting digital assets become more sophisticated. Independent Reserve, an Australian-based cryptocurrency exchange, is taking proactive steps to protect its users, particularly the elderly, from potential scams.

Adrian Przelozny, CEO of Independent Reserve, revealed in an interview that the exchange has implemented a strategy to closely monitor transactions made by older customers. According to Przelozny, the exchange is particularly vigilant when they see “an 80-year-old making a crypto withdrawal,” ensuring they receive a phone call to verify the legitimacy of the transaction.

Przelozny emphasized that individuals over 65 years old are more vulnerable to scams, as they are often “less familiar” with internet and technology use. The exchange’s approach involves a dedicated compliance team that spends the day contacting users whose activity raises red flags. This team is trained to ask specific questions designed to identify whether the customer is aware of potential risks.

The Growing Threat of Scams in the Crypto Space

The threat of crypto-related scams is not limited to older individuals. Younger customers are also at risk, particularly in regions like the United Kingdom. Przelozny cited data from Lloyds Bank, noting that individuals aged 25–34 account for a significant portion of crypto scam victims in the UK. This demographic’s involvement highlights the pervasive nature of scams across age groups.

Independent Reserve’s compliance team monitors activities such as frequent small deposits or withdrawals, which are often indicative of scam involvement. When these patterns are detected, the team contacts the user to discuss the transaction and assess whether it may be part of a fraudulent scheme.

Challenges in Convincing Potential Victims

One of the significant challenges faced by Independent Reserve’s compliance team is convincing customers that they might be involved in a scam. Przelozny noted that many individuals are often “excited about the scheme they’ve been sold” and may become defensive when questioned. This reaction makes it difficult for the team to intervene before the customer incurs financial losses.

Despite these challenges, Przelozny stated that the exchange would not allow a customer to proceed with a withdrawal if the team is confident that the transaction is part of a scam. In such cases, the exchange takes decisive action, closing the account and instructing the customer to withdraw their funds back into their original bank account.

Socioeconomic Factors in Scam Susceptibility

Przelozny also pointed out that people from lower-income areas are more susceptible to crypto scams. He suggested that individuals in these regions might be more inclined to take risks in pursuit of quick financial gains due to limited financial resources. This behavior makes them more vulnerable to scams that promise high returns with minimal risk.

The Australian Federal Police (AFP) recently reported a significant increase in investment scams, with a large portion being crypto-related. Over the past year, Australians have lost approximately 382 million Australian dollars (around $269 million) to such scams. The AFP highlighted that modern technology plays a crucial role in these scams, with methods like pig butchering and deepfakes becoming increasingly common.

Richard Chin, AFP Assistant Commissioner, remarked that “scammers promise high returns with little risk,” often using convincing marketing tactics to lure victims. These developments underscore the importance of vigilance and proactive measures by crypto exchanges to protect their users.