Which case won?

The case for the cryptocurrency trader
  • 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.
The case for the financial firm
  • 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
Case A Case B

Case B won. You were right!

How people voted
case a14%
case b86%

Expert commentary on the court's decision

Bill Akhurst
Bill AkhurstManaging Director
“While the financial firm was obliged to act with due care and skill, it was not obliged to conduct investigations into the trading opportunities the investor was considering to establish their legitimacy.”
Role of the Australian Financial Complaints Authority

This complaint was considered by the Australian Financial Complaints Authority, a dispute resolution scheme which acts as an ombudsman, helping consumers and small businesses reach agreements with financial companies about how to resolve their complaints. The complaints considered cover credit, finance, loans, insurance, banking deposits and payments, investments, financial advice and superannuation.

AFCA decides in favour of financial firm

In this case study published in October 2022 in AFCA’s Annual Review 2021-2022, the ombudsman found in favour of the financial firm, determining that it was not responsible for the cryptocurrency trader’s losses.

AFCA took the view that as the financial firm had told the investor he needed to do his own due diligence because it had no knowledge of Company K, it meant he had been adequately alerted that the investment opportunity did not have the endorsement of his financial firm.

The fact that the investor nevertheless decided to proceed with the bitcoin transfers, despite presumably having some reservations about the legitimacy of Company K, meant that he could not hold his financial firm responsible for his losses.

Responsibility to act with due care and skill

In its findings, AFCA pointed out that the relationship between the cryptocurrency trader and the financial firm was contractual, not fiduciary in nature.

While the financial firm was obliged to act with due care and skill, it was not obliged to conduct investigations into the trading opportunities the investor was considering to establish their legitimacy.

As the ombudsman further pointed out, neither was such an obligation imposed by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth). The financial firm was not obliged to have data scientists and analysts monitoring transactions and identifying unusual activity.

Growth in cryptocurrency scams in Australia

According to a report released by the ACCC in April 2023, Targeting scams – report of the ACCC on scams activity 2022, during that year 3,910 Australians were scammed using cryptocurrency as the payment method. The total reported lost was $221.3 million, representing an increase of 162 per cent.

Cryptocurrency was the most common payment method in investment scams generally, which resulted in combined losses over $1.5 billion. Given that according to the ACCC’s research, only 13% of scam losses are reported to Scamwatch and over 30% of people do not report scam losses at all, the amount lost by Australians via cryptocurrencies is likely to be higher than this.

That is not to suggest that cryptocurrency is the only way Australians are scammed. The same principles apply to any investment “opportunity”. Do your due diligence, or pay an impartial professional to do it for you.

Even an admirable complaints authority like AFCA may not be able to help you much if you have not done enough to protect your own interests.

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.

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