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P.E.I. fraud victim paid $62,500 in Bitcoin after threats of arrest, deportation

Instacoin president Michael Lo Verso, left, talks to his lawyer Michael Drake outside the provincial courthouse on Friday.
Instacoin president Michael Lo Verso, left, talks to his lawyer Michael Drake outside the provincial courthouse on Friday. - Ryan Ross

CHARLOTTETOWN, P.E.I. - A P.E.I. woman who gave $62,500 to fraudsters claiming to be from the Canada Revenue Agency was in provincial court Friday trying to get that money back.

No criminal charges have been laid in the case because the victim sent the money through untraceable digital currency Bitcoin, but Charlottetown police seized the cash from a Bitcoin ATM she used.

On Friday, the victim took the stand in Charlottetown to tell her story before lawyers for herself and the ATM owner, Instacoin ATM Canada Inc., argued their respective clients should get the money.

The victim, who is a permanent resident from Iran, told the court someone claiming to be from the Canada Revenue Agency (CRA) called her in February using an Ontario number and left a voicemail threatening to have her arrested if she didn’t call him back.

When she did call, the fraudster told the woman she made false claims on her taxes and he continued to threaten her with arrest if she didn’t comply.

Eventually the fraudsters told the woman she could avoid arrest by paying CRA in Bitcoin.

To make the scam more convincing, the fraudsters faked a call to the victim making the number show up on her phone as coming from her accountant’s office.

She told the court that over a span of several hours she stayed on the phone with one of the fraudsters who instructed her to withdraw money from the bank.

How the CRA scams work:
Charlottetown police Det. Sgt. Walter Vessey explained in court Friday that CRA fraudsters generally operate out of call centres called “boiler rooms” overseas.
The fraudsters run phone numbers through voice over internet service and then through proxy servers that mask their location, Vessey said.
In the case of the scam before the courts Friday, they also used electronic currency Bitcoin and Vessey said the police couldn’t identify the fraudsters.
“Due to the nature of Bitcoin we couldn’t follow the money,” he said.

The fake CRA employee told her how to make the payment through a Bitcoin ATM at a Charlottetown pizza restaurant, which she did.

Eventually she called the police after telling a friend what happened.

The next day, she received a call that showed on her phone’s caller ID as being from the RCMP at a time when she was expecting a call from the police.

After further threats of arrest and deportation, the woman went back to the pizza restaurant and transferred more bitcoins to the fraudsters.

Charlottetown police later got a warrant and seized the cash from the ATM, along with transaction records.

The victim said when she made the deposits there was a sign on the ATM telling people not to send money to unknown people.

At the time, she thought she was sending it to the CRA.

“It’s a known person. It’s government,” she said.     

Since her fraud, Instacoin installed signs at its ATMs across the Maritimes warning customers that the CRA doesn’t accept Bitcoin.

The court also heard from Instacoin president Michael Lo Verso who explained the company has taken several other steps since the fraud, including adding a warning on the ATM screen and starting a blacklist to block people across Instacoin’s network.

“The frauds are still happening, unfortunately,” Lo Verso said.

After the court heard from several witnesses, lawyer Jonathan Coady, who represented the victim, argued the seized cash should go back to his client.

Coady said the woman didn’t understand that she was buying Bitcoin when she thought she was paying the CRA.

When she made the payments she was under duress, Coady said.

He also said the court had to evaluate Instacoin’s conduct before the fraud, including not putting up warning signs despite knowing people were using them in the CRA scams.

Instacoin’s lawyer Michael Drake argued his client didn’t take advantage of anyone and will be out $62,500 if the money isn’t returned.

The company hasn’t been charged and it didn’t have any obligation other than transferring Bitcoins where it was told to, Drake said.

“Its actions were perfectly and utterly lawful.”

After hearing the arguments, Chief Judge Nancy Orr adjourned the matter until Oct. 12 for her decision.

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