Phishing Scam Compromises Thousands of Australian Crypto Wallets

The Australian Federal Police (AFP) has partnered with blockchain analytics firm Chainalysis to identify over 2,000 Australian-owned crypto wallets that have been compromised by overseas-based scammers. The compromised wallets were detected by the AFP as part of its involvement in an international anti-scam operation known as Operation Spincaster. 

According to the AFP, these wallets became compromised after the owners fell victim to a scamming tactic known as ‘approval phishing’, in which wallet owners are tricked into signing malicious transactions. Once these transactions are signed the scammers have access to the compromised wallets and can steal assets at their leisure.

Related: HSBC Australia Says Crypto’s Popularity with Scammers is Reason for Recent Block

Operation Focusses on Loss Preventions

The Australian arm of Operation Spincaster is led by the AFP’s Joint Policing Cybercrime Coordination Centre (also known as JPC3). The operation, which was launched earlier this year,  involves close collaboration between law enforcement and Chainalysis to identify compromised wallets before assets have been stolen—focussing on loss prevention—as it’s often extremely difficult to prosecute overseas scammers or recover lost funds once they’re gone. 

Internationally, the operation has already identified more than 7,000 law enforcement leads, with a combined total of AU$248 million in losses.

Speaking at the National Press Club last week, Assistant Treasurer Stephen Jones endorsed the importance of this approach, saying he was “deeply concerned that there is not enough weight put into prevention”. The Assistant Treasurer added that given the difficulty in recovering stolen assets much more work needs to go into prevention:

Surely, the objective has got to be to prevent your country being a target in the first place.

Stephen Jones, Assistant Treasurer

According to the AFP, ‘approval phishing’ is becoming a more common tactic in investment scams and romance scams, with crypto users being lured into signing malicious transactions by the promise of huge financial gains or a bull market in the bedroom (pardon the pun). The AFP says that since 2021, ‘approval phishing’ has accounted for over AU$4 billion worth of scam losses globally. 

Chainalysis Key to Operation’s Success

Operation Spincaster was actually started by Chainalysis in an attempt to combat the growing problem of crypto scams. Since the operation launched, Chainalysis has conducted workshops and shared information with over 100 attendees from cryptocurrency exchanges and law enforcement agencies from six different countries including the US, UK, Spain, Canada, the Netherlands and Australia.

Since joining the operation in June this year, the AFP says it has hosted a workshop for its staff and outside organisations, including crypto exchanges, which involved Chainalysis “sharing intelligence about compromised wallets, training on tracing stolen funds, guidance on detecting ongoing scam attempts in real time, and discussions about how to contact and support victims of approval phishing”. 

Related: Tether Taps Former Chainalysis Economist to Boost Transparency in Stablecoin Operations

Speaking about the ongoing battle against crypto scams, AFP Detective Superintendent Tim Stainton said given the international nature of these crimes, collaboration was vital:

Working together and sharing knowledge with industry, government and law enforcement partners is crucial…The intelligence we have gathered collaboratively throughout Operation Spincaster has shed a clear light on new tactics being used by cybercriminals in their continued efforts to defraud Australians.

Tim Stainton, AFP Detective Superintendent