The U.S. Department of Justice has seized an estimated $112 million of virtual currency from several cryptocurrency investment scams.
Judges authorized seizure warrants for six virtual currency accounts in the District of Arizona, the Central District of California, and the District of Idaho. The virtual currency accounts were allegedly used to launder the proceeds of various cryptocurrency confidence scams.
In these scams, the fraudsters cultivate long-term relationships with victims met online, eventually enticing them to make investments in fraudulent cryptocurrency trading platforms. In reality, the funds sent by victims for these purported investments were instead funneled to cryptocurrency addresses and accounts controlled by scammers.
“Transnational criminal organizations are combining confidence scams with technological savvy to swindle Americans out of their hard-earned funds,” Assistant Attorney General Kenneth Polite, Jr. of the Justice Department’s Criminal Division said. “These particularly vicious frauds – where scammers carefully cultivate relationships with their victims over time – have devastated families and cost individuals their life savings. Now that we have seized this virtual currency, we will seek to swiftly return it to victims. In addition to our tireless efforts to disrupt these schemes, we must also work to raise public awareness and help inform potential victims: be wary of people you meet online; seriously question investment advice, especially about cryptocurrency, from people you have not met in person; and remember, investments that seem too good to be true, usually are.”
In 2022, investment fraud totaled $3.31 billion, making up the highest losses of any scam reported by the public to the FBI’s Internet Crimes Complaint Center (IC3). Frauds involving cryptocurrency represented the majority of these scams. They increased 183 percent to $2.57 billion in reported losses last year.
These schemes are often called “Sha Zhu Pan,” a Chinese phrase that loosely translates to “pig butchering.” These scammers often target their victims through social networking and online communications platforms, dating websites, and phone calls and text messages that are meant to appear to have been misdialed. After gaining the trust of their victims, sometimes over several months, the scammers eventually introduce the idea of trading in cryptocurrency. They then direct victims to certain cryptocurrency investment platforms run by co-conspirators posing as investment advisors or customer service representatives. These websites are built to look similar to legitimate trading platforms. Once victims make an initial “investment,” the platforms purport to show substantial gains. It is not until a large investment is made that victims find that they are unable to withdraw their funds.
“Depriving scam organizations of their ill-gotten gains is an important part of our strategy to combat these ruthless schemes,” Director Eun Young Choi of the Criminal Division’s National Cryptocurrency Enforcement Team (NCET) said. “We will continue to use all tools at our disposal to disrupt and deter cryptocurrency confidence schemes, including by following the money on the blockchain and seizing cryptocurrency to return funds to victims and by targeting and taking down online infrastructure used by the scammers.”