The U.S. Department of Justice has seized six digital currency accounts worth approximately $112 million linked to crypto investment scams in Arizona, Idaho and California.
According to a court filing, scammers allegedly used these digital accounts to launder money obtained from various crypto schemes. Victims invested their money in what they thought were legitimate crypto trading platforms, but the scammers and their co-conspirators funneled the money to these digital currency accounts instead.
The scammers used a fraud method called "pig butchering," which involves building long-term, personal relationships with victims via online platforms. Once the victims trusted the scammers, they eventually persuaded these people to invest in fraudulent crypto trading platforms.
These fraudulent platforms were designed to show the victims that they made substantial gains with their initial investments. In some cases, these victims could even withdraw some of these gains to increase their trust in the scheme.
However, once a victim invested heavily in one of these platforms, they could no longer access their fund. Scammers would then demand victims make additional investments or pay fees and taxes to regain access.
In one of the cases, the scammers targeted a professional woman whom they found via social media LinkedIn. The woman said the scammers used the fictitious name "Fei Kuang" to contact her. After learning that she already had a crypto account, Fei Kuang offered her opportunities to grow her crypto investment by trading in other exchanges.
When the victim tried to withdraw her money, she was told she had to pay 20 percent in taxes. She realized that she had been scammed when they demanded more money, with the fraud costing her $2.5 million.
"Transnational criminal organizations are combining confidence scams with technological savvy to swindle Americans out of their hard-earned funds."
Kenneth Polite Jr., Assistant Attorney General at the U.S. Department of Justice
DOJ Assistant Attorney General Kenneth Polite Jr. explained that the scams were performed by transnational criminal organizations that combined traditional confidence scamming methods with technology.
"These particularly vicious frauds – where scammers carefully cultivate relationships with their victims over time – have devastated families and cost individuals their life savings," Polite said. "Now that we have seized this virtual currency, we will seek to swiftly return it to victims."
Polite added that the DOJ hoped to raise awareness surrounding this particular type of fraud. Officials warned people to be wary of people they meet online and seriously consider investment suggestions, especially regarding crypto and other forms of investment with promised high returns.
Eun Young Choi, the director of the DOJ's Criminal Division's National Cryptocurrency Enforcement Team (NCET), stressed the importance of depriving scam organizations of their "ill-gotten gains" in combating these fraudulent schemes.
Choi promised that her department would continue using its tools to deter crypto confidence schemes, including tracing the lost fund on the blockchain and seizing the digital assets to return them to the victims. She also praised victims who came forward to report their cases to the Federal Bureau of Investigation (FBI), noting that early notification was necessary to ensure the success of the investigation.
Crypto fraud rising in U.S.
Last year, investment fraud led to the biggest losses among all scam types reported to the FBI's Internet Crimes Complaint Center (IC3), amounting to $3.31 billion. Frauds involving crypto represented $2.57 billion of the total scammed amount, a 183 percent increase from the year before. FBI's data showed that the highest number of scam reports came from people between the productive ages of 30 and 49.
Martin Estrada, U.S. attorney for the Central District of California, said high-tech fraudsters took advantage of the hype surrounding crypto to entice under-informed Americans to invest in "get-rich-quick schemes."
Estrada added that the use of digital currency in scams presented new challenges not only to victims but also authorities in the effort to recover the lost funds. Nevertheless, he assured that authorities had taken strong measures to protect U.S. consumers.