On September 9, 2024, the Federal Bureau of Investigation (FBI) released the 2023 Cryptocurrency Fraud Report. The report deeply analyzes the cryptocurrency-related complaints received by the Internet Crime Reporting Center (IC3) in 2023 from both macro and micro levels, and explores the characteristics of cryptocurrency and the main types of cryptocurrency crimes that year. This article will interpret the core content of the report to help readers quickly grasp the key information and improve their understanding and response capabilities to complex security threats.

Key Point 1: Cryptocurrency-related Complaints Data in 2023

In 2023, the FBI Internet Crime Complaint Center (IC3) received more than 69,000 financial fraud complaints involving cryptocurrencies, involving a total loss of more than $5.6 billion. Although complaints involving cryptocurrencies only account for about 10% of total financial fraud complaints, the losses caused by these complaints account for nearly 50% of the total losses.

Cryptocurrency-related losses increased 45% in 2023 compared to 2022.

1. By age:

Victims aged 60 and over suffered the largest losses, totaling $1.648 billion.

2. Classification by crime type:

Investment Fraud:

  • Number of complaints: 32,094

  • Loss: $3.961 billion

Tech Support Scams:

  • Number of complaints: 8,719

  • Loss: $421 million

Personal Data Breach:

  • Number of complaints: 8,716

  • Loss: $495 million

Intimidation/Extortion:

  • Number of complaints: 8,630

  • Loss: $9.28 million

3. By country:

  • Countries with the most complaints: United States (57,762), Canada (1,236)

  • Countries with the largest losses: United States ($4.809 billion), Cayman Islands ($196 million)

Key Point 2: Why Criminals Use Cryptocurrency

1. Decentralized nature: The decentralized and distributed nature of cryptocurrency makes it a secure means of value transfer, where users can transfer cryptocurrency globally in exchange for goods, services, and other cryptocurrencies. Therefore, criminals take advantage of these features to conduct illegal activities such as theft, fraud, and money laundering.

2. Transaction Irreversibility: Cryptocurrency transfers/transactions can be made anywhere and are irreversible, allowing criminals to conduct cross-border transactions quickly and on a large scale without being subject to the anti-money laundering measures of traditional financial institutions.

3. Challenges in tracking funds: Although blockchain provides a public distributed ledger that allows law enforcement to track funds, there are still many difficulties in tracking cryptocurrencies that are transferred "cross-border". Therefore, SlowMist believes that it is necessary to rely on international cooperation to achieve effective law enforcement. For details, please review the viewpoint | International cooperation in law enforcement will become a major trend in combating cryptocurrency crimes.

Key Point 3: Focus on Cryptocurrency Crime Types in 2023

1. Investment fraud

Investment fraud was the largest crime type for cryptocurrency-related losses in 2023, accounting for approximately 71% of total losses, a 53% increase from 2022 ($2.57 billion). The most common type of cryptocurrency investment fraud in 2023 was trust-based:

  • Scam: Scammers use dating apps, social media, social networking sites, or encrypted messaging apps to find their targets and spend weeks or even months building trust with their targets. Once trust is established, scammers introduce the topic of cryptocurrency investment, such as claiming to have some expertise or knowing experts who can help potential investors make money, and induce victims to invest by showing false profits. Scammers allow victims to withdraw a small amount of funds in the early stages to get a taste of the sweetness so that victims can have more trust in the fraudulent platform. When victims try to withdraw the principal and the so-called profits, they are told that they need to pay fees or taxes. However, even if the victim pays the mandatory fees or taxes, the fraudulent platform will not return any funds.

  • Labor trafficking: Scammers post fake job ads on social media and online employment sites, targeting primarily Asian populations. Once job seekers arrive, scammers typically confiscate their passports and travel documents, using violence or threats to coerce them into cooperation. Victims are told they must pay various fees, such as transportation and document processing fees, which means they start out in debt. They then have to work to pay off their debts while also trying to pay for food and lodging. Scammers use victims’ growing debts and fear of local law enforcement as an additional means of control.

In addition to trust-based cryptocurrency investment fraud, there are many other types of cryptocurrency-related investment fraud:

  • Liquidity mining scam: Liquidity mining schemes are an investment strategy in the cryptocurrency space. In legitimate liquidity mining operations, investors put cryptocurrencies into a liquidity pool in order to provide the liquidity required for transactions and receive part of the transaction fees in return. However, scammers often exploit people's interest in cryptocurrencies to commit fraud. Scammers generally gain the trust of victims (usually investors holding USDT or ETH) and lure them into fake liquidity mining schemes by offering high returns of 1% to 3% per day. Scammers will eventually convince victims to transfer cryptocurrencies to so-called liquidity mining platforms, which are actually scam platforms, and once the money is transferred, it is difficult to recover. Previously, we explained this type of scam in the Web3 Security Beginner's Guide to Avoiding Pitfalls｜Fake Mining Pool Scams. Readers can click on the link to learn more.

  • Play to Earn (P2E) Games: Scammers promote fake gaming apps they create as games that can earn money and offer financial rewards to players. Scammers contact potential targets online and build relationships with them. Then, scammers introduce victims to games that claim they can earn cryptocurrency rewards by participating in certain activities, such as growing "crops" on an animated farm. To participate in the game, scammers instruct victims to create a cryptocurrency wallet, purchase cryptocurrency, and join a specific gaming app, claiming that the more money deposited in the wallet, the more rewards they will receive in the game. However, the victim actually sees the fake rewards accumulating, and when the victim no longer deposits funds into the wallet, the scammer will withdraw the funds and tell the victim that they can recover the funds by paying additional taxes or fees, but this is a bottomless pit. If users want to participate in such formal games, it is recommended to use a dedicated wallet and regularly check the wallet for abnormal authorizations using tools such as Revoke.Cash or Scam Sniffer, and cancel them in time if there are any.

2. Cryptocurrency self-service kiosks

Crypto kiosks are ATM-like devices or electronic terminals that allow users to exchange cash and cryptocurrencies. Typically, scammers provide victims with detailed instructions on how to withdraw cash from a bank, how to find a kiosk, and how to use the kiosk to deposit and send money. This method provides greater anonymity than depositing cash at a financial institution. In 2023, the IC3 received more than 5,500 complaints about cryptocurrency kiosks, with losses exceeding $189 million.

3. Cryptocurrency recovery scams

Victims who have lost money to various scams may also be scammed a second time. Some fraudulent companies claim to provide cryptocurrency tracking services and promise to recover lost funds. They promote fraudulent cryptocurrency recovery services on social media and contact victims who seek help online. These fraudulent companies charge victims an upfront fee and then "disappear" or provide incomplete and inaccurate tracking reports and require victims to pay additional fees to recover funds. These fraudulent companies also claim to have connections with law enforcement or legal services to appear legitimate.

SlowMist would like to remind you that according to SlowMist's experience, you need to report the theft/fraud as soon as possible. Technology companies like SlowMist cannot retrieve user information or freeze accounts. Only law enforcement agencies can freeze accounts and retrieve funds under the compliance process of the exchange. However, if you are unfortunately stolen/fraudulent, you can submit a form to us. We can provide you with basic tracking evaluation and fund flow analysis for free, and synchronize the verified hacker address to the InMist Threat Intelligence Cooperation Network for blacklisting. We will do our best to track and evaluate the stolen funds and analyze the fund flow, but the evaluation results are for user reference only and are not used as a legal basis. Users must not only follow the facts, but also comply with the regulatory policies and laws and regulations of their country. (Note: Submit the Chinese form to https://aml.slowmist.com/cn/recovery-funds.html, and submit the English form to https://aml.slowmist.com/recovery-funds.html)

Summarize

This article interprets the "2023 Cryptocurrency Fraud Report" released by the Federal Bureau of Investigation (FBI), revealing the data of cryptocurrency-related complaints in 2023, how various criminals cleverly use the special properties of cryptocurrency to commit fraud, and the specific methods and types of crimes. Faced with increasingly complex and diverse cryptocurrency fraud methods, each of us needs to be vigilant and enhance our awareness and ability to prevent. Only by distinguishing the true from the false, operating with caution, and always being skeptical can we effectively protect our property safety while enjoying the convenience and innovation brought by cryptocurrency.

Author | Lisa

Editor | Liz