Cryptocurrency scams are the riskiest type of scams in the US now, with cybercriminals regularly cheating people out of thousands of dollars, according to the Better Business Bureau, quoted by CBS.
In the BBB’s annual report on scams in 2023, it says scammers are finding more and more creative ways to defraud would-be investors. The publication cites data from 67,000 reports of scams.
The BBB reported that 80% of people who were targeted in crypto scams in 2023 lost money. While the median dollar amount lost is not that impressive – less than $4,000 – many people lost much more than that in crypto scams, according to Anna Werner, CBS News national consumer investigative correspondent.
Which communication channels do scammers prefer?
Scammers contact potential victims via social media, text messages, or video game platforms and share with them that lots of people, including themselves, are doing very well financially after investing in crypto. If the person replies, the scammer starts asking for money. They insist the victim purchase, hold, or trade crypto or another digital asset on an exchange that seems legitimate at first glance but is not.
The crypto market is still ripe for fraud
While cryptocurrency regulations have come a long way, elements of the market remain “ripe for fraud” according to authorities, law enforcement, and consumer advocates. The popularity of crypto is now at an all-time high after Bitcoin broke price records on February 5.
More and more people are pouring money into leading cryptos – not only Bitcoin but also Ethereum and Solana. Some are also investing in meme coins, which can be a lucrative prospect. However, crypto investments aren’t without risks. FTX was once a legitimate company, but it went bankrupt, and its founder has been charged with a slew of crimes. Terraform Labs, the firm that issued the failed TerraUSD stablecoin and Terra Luna, was also legitimate once. Terra Luna was one of the biggest tokens by market cap.
Investors in crypto have collectively lost billions of dollars in scams and hacks. A 70-year-old woman from California woman lost $720,000 to a fraudster in a crypto scam, but the transactions went through the obviously legit Chase Bank, which she is now suing.
Employment and online purchase scams follow suit
According to the BBB’s report, employment scams are the second-riskiest type of scam. These occur when a fraudster contacts a potential victim and convinces them a company they applied for has hired them. They ask for their personal data to “complete employee information.” They steal this data and use it for a variety of purposes, including taking out loans in victims’ names. In 2023, the median sum lost in such scams was $1,995.
Rounding out the top three are online purchase scams. The buyer purchases an item through a phony website, and it is never delivered. The amount lost in these scams is relatively low, though, with a median of $71.
How to stay safe
Always exercise a high degree of caution if someone or a company makes unrealistic promises involving investments or high returns with little to no risk. Before investing in a cryptocurrency, read the whitepaper. The absence of one is a sign that something is wrong and should be taken as a red flag. Be wary of unverified or anonymous promoters, as they often lack credibility.
Hackers are inclined to attack online crypto wallets, so you could protect yourself by holding your funds in a physical or an offline wallet. Hold the physical wallet in a secure place with the public and private keys held separately. Hardware wallets are safer because the private keys are stored on a physical device offline. Hackers cannot access anything that is not online. Bankless Times has a detailed article about the most common types of crypto scams and additional tips from one of our experts on how to protect yourself.
What is being done to combat crypto scams?
A recent incident with a straightforward scam involving a businessman from Bengaluru, India, underscores the challenges that entities like AMLBot face on a regular basis. AMLBot is a crypto compliance company known for its expertise in AML and KYC compliance. It took on this case as part of its daily operations. While recovering stolen assets is routine for them, this company’s role in educating local law enforcement on investigative techniques stands out in this particular scenario.
The incident: a common scam leading to a $100K loss
The businessman fell victim to a classic scam where he was enticed by an offer of $1 million in funding, with the condition that he needed to deposit a 10% commission, amounting to $100,000 in cryptocurrency, into a newly created wallet. This deceptive scheme resulted in the immediate loss of $100,000, starkly highlighting the risks omnipresent in the digital finance ecosystem.
AMLBot’s swift intervention after the scam report led to the freezing of $50,000 — half of the stolen funds – within just 48 hours. This action was taken on three of the six services where the funds had been dispersed. AMLBot is now in ongoing negotiations with the compliance departments of the remaining three services to recover the rest of the funds.
Training engagement: sharing expertise with law enforcement
The collaboration with the Whitefield Cyber Cell Division of Bengaluru, Karnataka, stemmed from their astonishment at the speed with which AMLBot resolved the case. Impressed by this efficiency, law enforcement expressed a keen interest in learning AMLBot’s methodologies for swiftly addressing and investigating crypto scams. The resulting training session aimed to provide the officers with practical knowledge and investigative techniques, thereby enhancing their capacity to manage similar incidents in the future.
The training provided to the Whitefield Cyber Cell Division was meticulously designed to meet the practical demands of law enforcement in the realm of crypto investigations. The curriculum included:
· Basic investigative methodologies tailored for crypto-related cases.
· Techniques for distinguishing between service wallets and externally owned wallets.
· Use of real-time transaction monitoring tools to track and analyze crypto transactions.
· Strategies for drafting effective recovery and information request letters to crypto exchanges and other financial platforms.
This structured approach aimed to equip the officers with a comprehensive toolkit for efficiently handling and resolving crypto-related crimes.
Reflections on the training
The collaboration between AMLBot and the Bengaluru Cyber Cell reflects a shared commitment to improving the security of the cryptocurrency ecosystem through knowledge exchange. This engagement serves as a practical measure to bolster the investigative capabilities of local law enforcement in the realm of digital finance crimes.
Reflecting on the collaboration and the broader mission of AMLBot, CEO Slava Demchuk commented:
Our engagement with the Whitefield Cyber Cell Division underscores our commitment not just to our clients but also to the larger community. We’re contributing to a safer crypto environment by sharing our expertise with law enforcement. It’s about more than just recovering funds; it’s about building a foundation of knowledge that can help prevent these crimes in the first place.
This incident highlights the routine yet critical work undertaken by firms like AMLBot in mitigating the impacts of common scams within the cryptocurrency sector. The training provided to the Bengaluru Cyber Cell signifies a constructive approach to enhancing the overall efficacy of law enforcement in responding to and investigating crypto-related offenses, contributing to a safer digital financial environment.
