The US Department of Justice (DoJ) has announced the seizure of six cryptocurrency wallets believed to have been used to launder the proceeds of investment fraud scams.
The wallets contained an estimated $112m, a drop in the ocean compared to the more than $3.3bn lost to investment fraud in 2022. Cryptocurrency fraud accounted for the majority of this figure ($2.6bn), with the value of related scams surging 183% from 2021, according to the FBI.
Judges in the District of Arizona, the Central District of California and the District of Idaho authorized the seizures.
The money in the six crypto wallets is believed to have been stolen in “pig butchering” fraud – a variation on investment fraud which often begins with the scammer cultivating a friendship with their victim on social media or dating websites.
Read more on pig butchering scams: Researchers Warn of Crypto Scam Apps on Apple App Store.
After perhaps months of building trust, the fraudster will introduce the idea of trading in cryptocurrency and direct the victim to a legitimate-looking app or website designed for the purpose.
Although these platforms are built to show the investor making significant gains on their initial outlay, the truth is that the money is funnelled directly to the scammers. The goal is to persuade them to invest more and more, perhaps even allowing them to withdraw a small sum of their ‘profits’ in order to continue building trust.
Only when the victim decides to withdraw a big sum do they realize the whole thing is a scam. Often they’ll be told to pay an exit fee or taxes to gain access to their accounts, which also goes to the scammers.
“Depriving scam organizations of their ill-gotten gains is an important part of our strategy to combat these ruthless schemes,” said director Eun Young Choi of the Justice Department Criminal Division’s National Cryptocurrency Enforcement Team (NCET).
“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.”
The DoJ urged would-be investors to be skeptical of any unsolicited contact and advice, and encouraged victims to come forward at an early stage to seek help from law enforcement.
