FBI Releases Statistics on Bitcoin Fraud

The 2023 IC3 Cryptocurrency Report[1] from the FBI details Bitcoin fraud and how criminals exploit Bitcoin’s decentralized and anonymous nature for illicit activities like fraud, theft, and money laundering. Criminals target victims through investment fraud, confidence schemes, and scams involving cryptocurrency recovery services. Scammers also use sophisticated techniques like SIM swapping[2], where they hijack a victim’s phone number to steal crypto, and pig butchering schemes, in which long-term relationships are built with victims to convince them to invest in fraudulent platforms.

Key Topics:

1. Investment Fraud: The report highlights a sharp rise in cryptocurrency-related investment fraud, where criminals use deceptive practices to lure victims with promises of high returns and minimal risk. Losses from cryptocurrency investment fraud increased by 53%, rising from $2.57 billion in 2022 to $3.96 billion in 2023. The most reported victims were aged 30-49, but those over 60 suffered the most significant financial losses, totaling over $1.24 billion.
2. Confidence-Enabled Bitcoin Fraud (Pig Butchering): In 2023, pig butchering became one of the most prominent cryptocurrency scams. Criminals use social media platforms, dating apps, and networking sites to establish relationships with their targets. Once trust is built, the scammers introduce cryptocurrency investments, often guiding the victim to fraudulent apps or websites controlled by the criminals. Victims are shown fake profits, encouraged to invest more, and sometimes allowed to withdraw small sums early to foster trust. However, when they attempt to withdraw their full investment, they’re required to pay excessive fees or taxes, only to realize that their funds are unrecoverable.
3. SIM Swapping: Criminals use SIM swapping techniques to hijack victims’ phone numbers. They then access the victim’s cryptocurrency wallets by bypassing two-factor authentication (2FA) tied to the victim’s phone. By controlling the SIM, the fraudsters can reset account passwords and transfer funds out of the victim’s wallets. Recently, even the United States Securities and Exchange Commission was subject to a sim swapping attack[3].
4. Labor Trafficking Nexus: Victims are also lured into cryptocurrency-related scams through fraudulent job offers, particularly targeting individuals in Asia. Criminal organizations recruit job seekers through ads for lucrative positions, often in tech or customer service. Once victims arrive in foreign countries, their passports are confiscated, and they are forced to participate in fraudulent cryptocurrency operations, accumulating debt through manipulated expenses such as room and board.
5. Liquidity Mining Scams: Liquidity mining, a legitimate investment strategy, is exploited in this scam. Criminals build trust with targets and guide them into linking their cryptocurrency wallets to fraudulent liquidity mining platforms. Through these platforms, scammers drain funds without the owner’s permission, taking advantage of victims who are unaware of the technical aspects of these investments.
6. Play-to-Earn Gaming Scams: In another scam variation, criminals create fake gaming apps that offer financial incentives to users in exchange for participating in seemingly innocent activities like virtual farming or gameplay. Victims are instructed to link cryptocurrency wallets to these fraudulent apps, and their funds are stolen once they stop depositing money. The scam is compounded by malicious software embedded in the game.
7. Cryptocurrency Kiosk Scams: Cryptocurrency kiosks, similar to ATMs, are becoming popular tools for fraud. Scammers instruct victims to withdraw cash and deposit it into cryptocurrency kiosks, using QR codes to facilitate the transfer. In 2023, over 5,500 complaints involving cryptocurrency kiosks were reported, with losses exceeding $189 million. Individuals over 60 were particularly targeted, losing more than $124 million.
8. Cryptocurrency Recovery Scams: Following losses from fraudulent schemes, some victims are targeted again by so-called recovery services, which claim to help retrieve lost funds. These fraudulent businesses demand upfront fees but fail to deliver results, often prolonging the scam by producing fake reports or requesting additional payments.

FBI Recommendations for Victims of Bitcoin Fraud:

The FBI urges the public to report Bitcoin [4]fraudto IC3, even if no financial loss has occurred. Key details such as transaction information, addresses, amounts, and how the scam was initiated can help law enforcement trace funds and identify perpetrators. The agency also cautions against using cryptocurrency recovery services that demand upfront fees and warns the public about impersonation schemes where criminals pose as legitimate businesses or government agencies.

Protecting Yourself from Bitcoin Fraud:

The report provides several tips for protecting against cryptocurrency fraud:

• Be cautious when receiving investment advice from people you haven’t met in person, especially those online.
• Avoid job offers that seem too good to be true or involve vague details.
• Regularly monitor permissions in your cryptocurrency wallets, especially when using decentralized applications (dApps).
• Be skeptical of unsolicited calls, particularly those demanding payment via cryptocurrency kiosks or pressuring you to act quickly.
• Stay informed about fraudulent schemes and double-check the legitimacy of any investment platforms or job opportunities before engaging.

FBI’s Role in Combating Bitcoin Scams:

The FBI has established a specialized Virtual Assets Unit (VAU) to tackle cryptocurrency-related crimes. The VAU centralizes the FBI’s cryptocurrency expertise and provides support for investigations, blockchain analysis, and training. This unit collaborates with the FBI’s 63 Legal Attaché (Legat) offices worldwide, enhancing international law enforcement cooperation.

The FBI’s Virtual Assets Unit is crucial in the effort to detect, investigate, and prosecute criminals exploiting virtual currencies for illicit activities. It remains a focal point in ensuring that law enforcement remains equipped with the necessary tools and knowledge to trace funds, seize assets, and hold offenders accountable.

Conclusion:

The 2023 IC3 Cryptocurrency Report highlights the continued rise in cryptocurrency-related fraud, with criminals taking advantage of digital assets’ decentralized, anonymous nature. Through SIM swapping, pig butchering, investment fraud, and other schemes, criminals have targeted victims across all age groups, with older individuals reporting the highest financial losses. The FBI’s guidance and proactive stance on cryptocurrency crime prevention provide a roadmap for both law enforcement and the public to address and mitigate the risks associated with digital assets.