The Department of Justice announced today that it has seized virtual currency worth an estimated $112 million linked to cryptocurrency investment scams.
Seizure warrants for six virtual currency accounts were authorized by judges in the District of Arizona, the Central District of California, and the District of Idaho.
According to court documents, the virtual currency accounts were allegedly used to launder the proceeds of various cryptocurrency confidence scams. In these schemes, fraudsters cultivate long-term relationships with victims met online, eventually enticing them to make investments in fraudulent cryptocurrency trading platforms. In reality, however, the funds sent by victims for these purported investments were instead funneled to cryptocurrency addresses and accounts controlled by scammers and their co-conspirators.
“Transnational criminal organizations are combining confidence scams with technological savvy to swindle Americans out of their hard-earned funds,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “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 caused the highest losses of any scam reported by the public to the FBI’s Internet Crimes Complaint Center (IC3), totaling $3.31 billion. Frauds involving cryptocurrency, including pig butchering, represented the majority of these scams, increasing a staggering 183% from 2021 to $2.57 billion in reported losses last year.
According to the FBI, the highest number of reports came from victims between the ages of 30 and 49. In these schemes, often called “Sha Zhu Pan,” a Chinese phrase that loosely translates to “pig butchering,” 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 a period of months – scammers eventually introduce the idea of trading in cryptocurrency. They then direct victims to cryptocurrency investment platforms or to co-conspirators posing as investment advisors or customer service representatives.
Scammers control websites that are built to look similar to legitimate trading platforms, applications that victims download onto their phones, or malicious smart contracts accessed through cryptocurrency wallet software. Once victims make an initial “investment,” the platforms purport to show substantial gains. Sometimes, victims are even allowed to withdraw some of these initial gains to further engender trust in the scheme.
It is not until a large investment is made that victims find that they are unable to withdraw their funds. Even when a victim is denied access to their funds, the fraud is often not yet over. Scammers request additional investments, taxes, or fees, promising that these payments will allow victims access to their accounts. These scam operations often continue to steal from their victims and do not stop until they have deprived victims of any remaining savings.
“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 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. Today’s announcements also demonstrate the value of early notification by victims to law enforcement; we thank those victims who came forward to notify the FBI when they were targeted by this scheme.”
“Financial fraud schemes like these demonstrate the great lengths criminals will take to swindle innocent victims out of their money,” said Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division. “We continue to see these schemes evolve and provide new avenues for criminals to exploit. Today’s announcement should serve as a reminder of the FBI’s unwavering commitment, alongside our federal and international law enforcement partners, to investigating and pursuing criminal actors who seek to defraud the American public. There is no place beyond the reach of the FBI.”
The FBI Phoenix Division is investigating this case.
