Investors lost a record $5.6 billion to crypto-related financial crime in 2023, up 45% from 2022, according to a report from the Federal Bureau of Investigation’s (FBI) Internet Crime Complaint Center (IC3) published recenty.
While the number of cryptocurrency-related complaints received by IC3 represents only about 10 percent of the total number of financial fraud complaints, the losses associated with these complaints account for almost 50 percent of the total losses.
The exploitation of cryptocurrency was most pervasive in investment scams, where losses accounted for almost 71 percent of all losses related to cryptocurrency. Call center frauds, including tech/customer support scams and government impersonation scams, accounted for about 10 percent of losses associated to cryptocurrency.
The decentralized nature of cryptocurrency, the speed of irreversible transactions, and the ability to
transfer value around the world make cryptocurrency an attractive vehicle for criminals, while creating
challenges to recover stolen funds. Once an individual sends a payment, the recipient owns the
cryptocurrency and often quickly transfers it into an account overseas for cash out purposes.
The typical Social engineered Cryptocurrency Investment Scheme:
Although there are many variations of cryptocurrency-related investment fraud, in 2023, the most prominent was a unique kind of confidence-enabled cryptocurrency investment fraud. The schemes are socially engineered and trust-enabled, whereby criminals use dating applications (apps), social media platforms , professional networking sites, or encrypted messaging apps to
establish relationships with their targets. Once trust is established, criminals introduce the topic of cryptocurrency investment. Criminals claim to have some expertise or know an expert who can help potential investors achieve financial success. Criminals then convince their targets to use fraudulent websites or apps, controlled by the criminals, to invest in cryptocurrency. Criminals coach their targets through the investment process, show them fake profits, and encourage them to invest more. Criminals may allow victims to withdraw small amounts early in the scam to engender more trust in the fraudulent platforms.
Nevertheless, when the victims attempt to fully withdraw their investment and any purported earnings, they are told they need to pay a fee or taxes. The scammers never release the bulk of funds, even if their victims pay the imposed fees or taxes.
Variations of cryptocurrency investment schemes:
Liquidity Mining Schemes
Liquidity Mining (schemes) is an investment strategy used to earn passive income with cryptocurrency. In legitimate liquidity mining operations, investors stakel their cryptocurrency in a liquidity pool to provide traders with the liquidity necessary to conduct transactions. In return, investors receive a portion of the trading fees. In this variation of cryptocurrency investment fraud, scammers exploit owners of cryptocurrency, typically Tether (USDT) and/or Ethereum (ETH). The scammer builds a professional or personal relationship with their target over a few days to weeks, gives instructions for purchasing if they do not already own cryptocurrency, and entices them to participate in liquidity mining by guaranteeing a return on investment of one to three percent daily. Scammers convince targets to link their cryptocurrency walletm to a fraudulent liquidity mining application. Scammers then wipe out the funds without notification or permission from the owner.
Fraudulent Play-to-Earn Gaming Applications
With fraudulent Play-to Earn Gaming Applications Scammers create fake gaming apps to steal cryptocurrency, which they advertise as play-to-earn games offering financial incentives to players.
Via social engineering scammers build trust with victims over time. Scammers
then introduce victims to an online or mobile game, in which players purportedly earn cryptocurrency rewards in exchange for some activity, such as growing “crops” on an animated farm.
To participate in the game, criminals direct victims to create a cryptocurrency wallet, purchase cryptocurrency, and join a specific game app. The more money they store in their wallet, the more rewards they will purportedly earn in the game. Victims play the game and see fake rewards
accumulating in the app. When victims stop depositing funds into the wallet, scammers drain them
using a malicious program that was activated upon joining the game. Although scammers tell victims they may reclaim funds by paying additional taxes or fees, they are unable to get their money back,
even if they pay the extra fee.
Cryptocurrency kiosks
Cryptocurrency kiosks are ATM-like devices or electronic terminals that allow users to exchange cash
and cryptocurrency. Scammers are known to direct individuals to use a cryptocurrency kiosk to send funds, which enables a more anonymous transaction than depositing the cash at a financial institution.
Typically, scammers give detailed instructions to individuals, to include how to withdraw cash from their
bank, how to locate a kiosk, and how to deposit and send funds using the kiosk. In most instances, the
cryptocurrency kiosk transactions are facilitated using QR codes, square barcodes with information
that can be scanned and read with a smartphone or kiosk camera. An individual can scan the QR code of an intended recipient at a cryptocurrency kiosk, making it easier to send cryptocurrency to the
correct destination.
No recovery is possible!
Please be aware that although lawyers and some fraudulent recovery organisations may tell you the opposite pls be aware that it is more or less impossible to get your money back. Note that private sector recovery companies (including lawyers) cannot issue legal orders to recover or seize stolen cryptocurrency. Cryptocurrency exchanges freeze accounts only based on internal processes or in response to legal documents issued by a court. Individuals who have lost money to scams may choose to pursue civil litigation to seek recovery of their funds. Only a very small portion of victims (<1%) has got its money back.
Do not become a victim of a crypto investment scam!
- Be sceptical when learning of investment opportunities via online research. Although Scam websites or applications are forbidden to be advertised online, nor are they allowed to be indexed by
webcrawlers from search engines like Google and others, but scammers still use google and social media to advertise their scam websites. Scammers are experienced in promoting their scams. - Verify the spelling of web addresses, websites, and email addresses that look trustworthy, but may be imitations of legitimate websites.
- If you are concerned about the legitimacy of the domain, never connect your cryptocurrency
wallet. - Never send material payments to someone you have only spoken to online, even if you believe you have established a relationship with the individual.
- Authenticate all links sent from known and unknown contacts before clicking.
- Periodically use a third-party token allowance checker to determine whether you have
inadvertently permitted any sites or applications access to your wallet. - Be cognizant that investors in legitimate liquidity mining operations deposit funds into the
platform and later withdraw the original funds along with any returns generated. Reconsider joining pools that deviate from this procedure. In a legitimate liquidity mining process, returns are usually tied to cryptocurrency market fluctuations in the specific cryptocurrency
or cryptocurrency pair being used. - If you wish to participate in cryptocurrency-related gaming, create a unique wallet to use.
This isolates your primary cryptocurrency holdings should you unknowingly grant illicit actors
access to your gaming wallet.
• Use a third-party blockchain explorer to independently check the balances of the addresses
in your gaming wallet.
