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Crypto ‘Profit’ Scam: Dark side of the web

Crypto 'Profit' Scam
The report cited Instagram being the target medium for scammers, accounting for 32% of online fraud

Having a cryptocurrency portfolio these days has become a part of the mainstream economic activities of the millennial. While various online softwares has made the process of investing in digital currencies a less hectic one, the whole phenomenon has opened another window for scammers.

In June 2022, the US Federal Trade Commission came up with a study that showed that around half of the reported crypto theft cases since 2021 had a connection with the victims falling for fraud across social media platforms. The lost capital was even paid via the digital currency route.

The report also cited Instagram being the target medium for scammers, thus accounting for 32% of such instances of online fraud. Facebook came next with 26% of similar reported cases.

The threat actors are targeting people in the age group between 20 to 49 across social media platforms. In the US, crypto has entered the mainstream payment mechanism club, and in 2021 alone, over 46,000 people reportedly lost more than USD 1 billion in crypto scams. In mathematical terms, the ratio stands for one out of every four dollars getting lost in the form of digital currencies. The most preferred medium for these scammers has been Bitcoin, Tether and Ether.

As per the report from blockchain research group Chainalysis, these cyber criminals stole USD 6.2 billion worldwide in the year 2021, an 80% increase from the 2020 figures. If the United Kingdom-based Action Fraud is to be believed, losses from such scams got doubled to £190 million in 2021.

How are these scammers operating?

As per the US FTC observations, these scammers are mostly using fake posts, and advertisements on Facebook and Instagram to lure potential victims. Sometimes, they are even directly messaging these ‘customers’ for investing in bogus schemes, in lieu of big monetary returns.

While some of these invitations come from ‘celebrities’ and ‘investment managers’, another popular choice has been ‘romance scams’, where these threat actors will build trust with their victims, and then make them invest capital in cryptocurrency.

While the study report talked about the number of unreported cases, it also mentioned that some USD 330 million got lost between January and March 2022, While in 2021, the same figure was nearly 60 times bigger than the corresponding stats since 2017.

Why crypto only?

Although crypto is becoming a part of the mainstream trading mechanisms, still it has a major drawback in the absence of a central bank-kind of authority, which can find out the source of such scams. Another major factor that helps these threat actors is once the user invests in crypto, he/she won’t get the money back, unless and until some profit/jackpot comes.

From 2021, most of the reported fraud cases have come in the form of bogus investment opportunities, with USD 575 million of crypto capital getting lost.

How to identify the red flags?

As per the victims’ accounts, most of these ‘investment opportunities’ come in the form of easy access to money promises, with luring offers of quick and huge profits. In some instances, the victims were even allowed to track their crypto capital growth, but the stats shown are fake. If they use a small amount of money just for practicing the crypto trade, they have been told to invest more in the form of digital currency to withdraw the profit amount. In reality, the money goes straight to the scammers’ pockets.

The second category has been the ‘Romance Scams’ which caused some USD 185 million in cryptocurrency losses in the US since 2021. Here, these threat actors will begin their work by casually advising their victims on crypto market investments, then will send a manual, which as per some of the reported cases, is a tutorial to deposit digital currencies to the scammers.

Another worrying one has been associated with the business and governance fields. The US saw some USD 133 million in losses in this category since 2021. Here, the scammers directly reach out to the victims via messaging apps. The people will be told on most occasions that their capital is at risk, citing ‘bank sources’. Some of these cases in the US have even seen the threat actors impersonating border patrol agents and threatening the victims to put their money in crypto ATMs to protect their savings from ‘getting frozen as part of drug trafficking investigation’.

In some cases, crypto experts have been conned by these scammers in the form of proxy Instagram handles, and open so many of them that it becomes difficult for the victims to find out the actual account in the social media platform’s search engine. In this case, they also resort to tactics like stealing personal photos from the original profile and running misleading ads using those pictures. One such prominent example has been ‘crypto-evangelist’ Jason Sallman whose family photos got stolen, with his wife even getting tagged in crypto scam-related posts. Even his picture with CNBC network producers was used by these cybercriminals, throwing cautions around copyright infringement clauses into the air. Not only were his photos used by his fake accounts to promote fraudulent schemes, but he got threatened online by a few of the victims, as well as getting real accounts taken down repeatedly.

Revisiting crypto scams in Italian hotbed

The name ‘New Financial Technology’ became the face of an organized crypto scam (or better to say ponzy scam in digital currency) in Italy, as the law enforcement authority came down hard on it in late 2020.

This London-headquartered company promised up to 10% profits via crypto market transactions, with a minimum deposit of €10,000 monthly. The company used the tested method of bringing crypto algorithms into play and benefited from the market mismatches on various digital currency exchanges.

Since 2018, it has defrauded some 6000 customers. The victims invested somewhere between €10,000 and €300,000.

While the probe is still ongoing, as per the initial reports, the company pocketed some 40 to 100 million euros. Two of its three founding directors are still absconding.

In 2019, there was another crypto scam where the Italian authorities arrested a Genoa-based computer expert who used to blackmail his victims through the darknet. He allegedly promised the affected persons to secure bitcoin investments in return for gold and cash deposits. He used to pose as an official representing a Swiss crypto company. Using Telegram, he even supplied some of his client’s stolen corporate identities.

In 2020, a 34-year-old Florence resident with the initials F.F, got named by the police as the key accused of running a crypto company called ‘Bitgrail’ which went bankrupt in 2019. He was also suspected of faking a cyberattack, while defrauding over 230,000 people who had access to nano coin, a digital currency launched in 2015. He caused losses of some USD 146 million, with the phenomenon dubbed the country’s biggest cyber-attack. He also tried to mislead the cops around 2018 by reporting the incident and the subsequent loss of the nano coins.

Even media giant BBC got tricked by ‘crypto scammer’

In February 2022, UK media giant BBC ran a story about a crypto investor from Birmingham named Hanad Hassan. The article claimed that Hassan put some £50 into digital currency market in 2021 and turned the investment into profits worth of millions. Sounds a typical rags-to-riches story right? Here comes the twist. While the article spoke about the individual’s ‘dream’ of using the profit amount to help his fellow community people, there was a complete lack of fact-checking and claims verification. The blunder from BBC’s part became quite evident when people came up with statements regarding Hassan scamming them.

In 2021 April, he launched a “charity token” called “Orfano” and followed a known method used by the crypto rag pullers (scammers constructing hype around their digital currencies, followed by abandoning the project and running away with the investors’ capital). He promised to his investors that some 3% of the funds to be kept aside for charity purposes. Those who believed his words felt that the man was doing something good for the society, only to hear the sudden news of “Orfano” being shut down and their invested amount going into waste. Hassan didn’t stop there, as he relaunched the portal as “OrfanoX” and duped a few more.

Cryptocurrency critic David Gerard called out the BBC and accused the media house of running a “puff piece” article. BBC also produced a 30-minute documentary on Hassan titled, “We Are England: Birmingham’s Self-Made Crypto-Millionaire”, only to pull it off from being aired.

Know the signs, stay clear of these scams

If you come across ‘smaller investments, big returns’ claims, with the provision of sending the crypto capital quickly, consider it as a major warning sign.

If your friend, or acquaintance messages you on Instagram or any other social media platforms regarding them making quick money with the help of ‘Bitcoin Mentors’, double verify the information.

Messages asking you to buy crypto first and put that on another digital wallet as ‘investment’. Don’t fall for them. Remember, investing in crypto is something that comes with a risk of losing your hard-earned money if there are massive volatilities in the digital currency exchange. Nobody can force you to buy or trade in crypto.

Misleading videos with wild claims of crypto successes. These are often considered as sort of ‘Hostage Videos’ as the real-time victims are forced to appear in front of the camera and propagate the falsehood.

‘Requests’ suggest you make changes in passwords, e-banking details, email account details, and crypto wallet credentials. If you fall for it, the threat actors will lock you out of these entities and start using the accounts for their mischievous acts.

On Instagram, you will come across these messages in the comment section of random posts, “I invested USD 1000 and ended up with a profit of USD 20,000”, with a link below. Don’t go for them. You can even block the sender’s account.

Be very careful while swiping accounts in dating apps. If you find a ‘Love Interest’ who comes with this unsolicited advice on how to invest in crypto, run away from it. Those are spam accounts.

While crypto is becoming a part and parcel of modern-day trading activities, still it has a major drawback in the form of a strong watchdog mechanism. While investing in bitcoin and getting rich at a short notice through lucrative returns looks like a delicious proposition, this same motivation also leads investors to the dark world of scams and data theft. Remember one thing, no sane person will share his or her crypto profit figures on social media, unless and until the user account is run by a threat actor.

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