HomeRisk ManagementsCryptocurrency scams evolve into new variations - Sophos News

Cryptocurrency scams evolve into new variations – Sophos News

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In the spring of 2023, a recent retiree fell victim to an online romance scam that led to devastating financial losses. The retiree, known as “Frank,” was lured in through a dating application by someone who claimed to live in his area. This individual eventually convinced Frank to invest over $20,000 in a scheme called “digital currency mining,” depleting his personal retirement savings.

The scam that ensnared Frank is just one example of the rapidly growing trend of cryptocurrency-based investment fraud. These scams have resulted in billions of dollars in losses for thousands of victims across the United States. Due to the borderless nature of cryptocurrency and the widespread confusion surrounding how it functions, scammers have been able to successfully convince individuals to convert their personal savings into crypto and then steal it from them.

One of the most prevalent forms of such criminal activities is known as sha zhu pan (“pig butchering”), a scam pattern that originated in China but has since spread globally. These scams have not only resulted in the theft of cryptocurrency but have also left victims destitute, with one reported case leading to the failure of a small bank after a bank officer fell victim to the scheme.

In recent years, a more sophisticated variant of cryptocurrency scams has emerged, utilizing fraudulent decentralized finance (DeFi) applications to defraud victims of their funds. These scams have been described as an evolution of previous pig butchering scams, combining the tactics of fake romance and friendship with the use of blockchain technology and smart contracts.

Unlike earlier pig butchering scams, these new DeFi schemes do not require victims to install a custom mobile app or deposit their funds into a wallet controlled by the scammers. Instead, they use trusted applications from well-known developers and only require victims to load a web page within the application. This gives victims the illusion of full control over their funds until the scammers seize control once the trap is sprung.

The organizations behind these scams are often divided into distinct parts, with a “front office” responsible for luring and engaging targets, and a “back office” handling IT operations, software development, and money laundering. Front office operations involve teams of individuals engaging potential targets through messaging platforms, social media, and dating profiles. The back office manages logistical requirements such as Internet infrastructure and fraudulent application acquisition or development.

In the case of DeFi mining scams, the back office infrastructure includes various tools such as mobile devices with secure messaging applications, social media and dating profiles, VPN connections, and generative AI for creating text messages.

Frank’s experience with the cryptocurrency investment fraud serves as a stark warning about the dangers of online romance scams and the devastating financial impact they can have on unsuspecting victims. It also highlights the need for greater awareness and understanding of cryptocurrency-based fraud schemes, as well as increased diligence when engaging in online financial transactions.

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