The FBI's 2023 Internet Crime Report highlights an alarming increase in cryptocurrency-related investment fraud.
According to the report, cryptocurrency scams accounted for 86% of all investment fraud losses in the United States, which amounted to $3.94 billion.
This represents a 53% increase from 2022, when multiple cryptocurrency scams plagued the sector, including the $32 billion FTX collapse and the $4.7 billion bankruptcy of Celsius (the founders of both companies faced fraud charges).
This increase in cryptocurrency-related scams is consistent with the broader trend of escalating financial fraud online. The Internet Crime Complaint Center (IC3) has documented a staggering total of more than $12.5 billion in online fraud losses.
The report details how investment fraud – primarily driven by cryptocurrency scams – jumped 38% to $4.57 billion. It also revealed that cybercriminals are increasingly taking advantage of the anonymity and fast transaction capabilities of cryptocurrencies, including Bitcoin (BTC), as well as cryptocurrencies such as Dogecoin (DOGE) and Shiba Inu (SHIB).
The FBI says executing the schemes has become easier. Scams can range from commercial email attacks ($2.9 billion in losses) to more sophisticated impersonation and phishing scams.
What makes the 2023 cryptocurrency fraud outbreak particularly noteworthy is the meticulous lengths to which the perpetrators went.
FBI: Scammers are evolving
According to the FBI, perpetrators use custodial accounts at major financial institutions, cryptocurrency exchanges, and third-party payment processors as conduits for their scams.
This strategy not only facilitates the rapid dissipation of illicitly obtained funds, but also complicates tracking and recovery processes.
The explosive growth of these crimes can also be seen through a global lens, with the FBI's findings resonating beyond US borders, for example, Germany's large seizure of more than $2 billion worth of Bitcoin in hacking proceeds.
The assets seized by the German government came from the operations of a site identified in previous investigations as “Movie2k.” This site was known for streaming pirated movies and has been one of the most frequent German destinations for such content online since its inception in 2008.
By distributing more than 880,000 pirated movies, its operators benefited from advertising and subscription fees. Among the identified suspects is a Berlin-based programmer and real estate businessman, who has since been arrested on commercial money laundering charges.
Others arrested include two people from Germany and Poland who are believed to have accumulated Bitcoin through the site's profits until its closure in 2013.
One of the suspects reportedly took a step towards recovery by voluntarily transferring the disputed bitcoin to the wallet of the Federal Criminal Police Office (BKA), after which the fate of these funds now awaits a judicial decision.
Earlier that same month, US authorities announced their plan to sell Bitcoin worth about $132.5 million, which was seized during an investigation into the notorious Silk Road market.
The District Court in Maryland revealed plans to liquidate the seized digital currency, the amount raised from two major busts of Ryan Farris and Sean Bridges.
Specifically, Varas' stash — amounting to 2,874,904,256 BTC (worth approximately $129,251,164.54 USD) — was secured in Memphis, Tennessee, on February 10, 2021. Another payment, comprising 58,742,155,166 Bitcoins (worth approximately $3,304,833.65 USD), was taken from Varas on Arlington, Virginia. On May 11, 2021.
In parallel, financial institutions are taking decisive steps to mitigate the risks associated with cryptocurrency transactions. It is worth noting that JPMorgan Chase & Co.'s decision to halt cryptocurrency transactions for its clients in the United Kingdom confirms the growing concerns surrounding these digital assets.
This proactive stance was aimed at protecting consumers from the rising threats posed by cryptocurrency-related fraud, which has seen consumer losses skyrocket, exceeding 40% in the UK alone.
