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Crypto scammers ramp up grifts by impersonating regulators and law enforcement

  • Governments are aggressively hunting crypto fraudsters.
  • Scammers have responded by impersonating regulators to lure new victims.
  • “It’s a very low chance that the perpetrators are ever going to get caught,” a cybersecurity expert said.

Now, it’s personal.

That’s what Erin West said after realising scammers had impersonated her to ensnare new victims.

The Santa Clara prosecutor is renowned for clawing back more than $2.5 million in stolen cryptocurrencies for victims while training local law enforcement to fight criminal syndicates.

Still, her crusade has given grifters a new tactic.

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“Scammers pretending to be me are on the loose,” West recently wrote on LinkedIn. “They are using my name and my picture. I promise you this: I will not send you a WhatsApp. I will not send you an unsolicited email offering to help with your case. I will not drop into your DMs uninvited.”

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West isn’t alone. Former US Securities and Exchange Commission director Brett Redfearn, as well as the agency itself, have also been impersonated.

UK, US and Canadian regulators have warned that scammers are using real and fake market watchdogs and associations’ names in their cons.

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“They exploit peoples’ trust in authority figures and institutions,” Jake Moore, global cybersecurity adviser at cybersecurity firm ESET, told DL News.

These impersonation scams come as governments have toughened their crypto scrutiny since the fall of FTX.

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Over the past six months, politicians have drafted new bills, market watchdogs have pursued industry Goliaths, and law enforcement agencies have arrested wanted fugitives.

Yet, in a familiar cat-and-mouse game, the crypto crackdown has created new opportunities.

Governments’ attention to crypto meant it was only a matter of time before grifters came knocking, several cybercrime experts told DL News.

“Criminals use every opportunity they can to trick or deceive someone,” Nicola R. Staub, a former cybercrime prosecutor and founder of scam prevention startup CYBERA, told DL News.

Investment scams are so 2021

Cybercriminals used to prefer investment scams, but they have become less profitable amid the crypto winter because people are not as willing to bet on investment schemes.

“When Bitcoin’s price declines, scams overall, their revenue flows tend to fall,” Eric Jardine, cybercrime research lead at crypto data firm Chainalysis, told DL News.

Crypto scam totals dropped to $5.9 billion in 2022 from $10.9 billion in 2021, according to a Chainalysis 2023 Crypto Crime report.

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That trend may change because Bitcoin is soaring this year, Jardine said, but he noted that if criminals have found impersonation scams to yield good returns that are easily scalable, they are unlikely to abandon them.

Government impersonation grifts and “pig butchering” — long romance cons in which the victims are “fattened up” — have fit the bill.

“These scams are increasing because of how effective they are,” Moore said.

It is not clear how many people have been victimised.

More than 45,000 impersonation scams in Britain in 2022 cost victims about £177.6 million ($227.6 million), according to UK Finance research.

Still, the real figure is probably bigger because frauds remain woefully underreported amid the stigma of being conned, according to Chainalysis.

On average, impersonation scams cost about $5,700 per victim in 2022, according to Chainalysis.

Government impersonation scams

Government impersonation scams are not new, though they have become more sophisticated.

Traditionally, they took the form of a phone call.

The caller would pretend to represent a trusted authority such as the IRS or the police — which was the case in a recent string of scam calls in Calgary, or as in one case in October, the New Zealand Financial Markets Authority.

The fraudster would then try to convince would-be victims to share personal information such as bank details.

The new wave of government impersonation scams feature websites built for purported crypto trading services that profess to be linked to government agencies or associations, or for government agencies themselves.

In June, the Canadian Securities Administrators warned that while these “websites appear to be credible at first glance, with references to complaint processing, dispute resolution and providing redress to aggrieved investors,” closer examination may reveal typos and grammar issues, “a common red flag.”

Challenging to fight

Regulators and law enforcement agencies have increased their efforts to oppose these criminal enterprises by clawing back stolen crypto, shuttering money laundering rings, and making arrests.

They are fighting an uphill battle, given the international and mutating nature of the criminal networks.

If police close down one scam, the digital thugs simply move on to another.

“It’s a very low chance that the perpetrators are ever going to get caught,” Moore said.

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The transparent nature of blockchains, the technology underlying cryptocurrencies, would make it easier to track stolen assets if criminals didn’t have so many tools — including crypto mixers and chain-hopping — to hide their tracks.

This means police have a limited window to catch the swindlers and reclaim stolen assets, but often their victims don’t immediately realise that they’ve been conned. So by the time the violations are reported, if ever, it may be too late.

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And even when victims do quickly notify the police, specific departments may not possess the necessary technical competence to handle such cases.

As Moore said: “We’ve got to protect ourselves from any type of scam by exercising caution.”

Do you have a tip about crypto scams or another story? Reach out to the author at via email eric@dlnews.com or on Twitter at @ericjohanssonlj.