Houston Police Seize over $200,000 in Cryptocurrency in Fraud Investigation

Earlier this year Houston Police Detectives were able to analyze, trace, and seize cryptocurrency fraud proceeds that had been sent to a global exchange. TRM Labs is proud to support the Houston Police Department in this investigation and its other efforts to disrupt fraud and financial crime in the growing crypto economy.

According to the seizure warrant, the victim was convinced to invest in a fictitious cryptocurrency trading platform called “Gemini Services” – likely an attempt to capitalize on the reputation of the legitimate exchange of the same name.

The victim, as shown in TRM graph visualizer below, was defrauded into sending over USD 800,000 worth of USDT and ETH via several transactions to the fictitious platform.

According to the seizure warrant, Detectives “used TRM, a cryptocurrency tracing software, to follow where the funds went after the initial deposits from [victim].” Specifically, four scammer addresses received the funds and then dispersed the funds to additional addresses and then to a global cryptocurrency exchange.

Houston PD quickly contacted the global exchange and requested a freeze of assets and the customer records for the account owners. Houston PD, with the help of the exchange and armed with blockchain evidence, were able to identify the account owners – who, according to the affidavit, are based in China – and seize back over $200,000 worth of cryptocurrency for the victim.

This case is an outstanding example of how local law enforcement, armed with tools and training, can investigate a global fraud ring and seize back funds for victims. However, tracing and tracking alone cannot stop this global scam scourge.

These types of investment scams are becoming increasingly common and can take advantage of the most sophisticated actors. According to TRM, the amount of cryptocurrency sent to addresses linked to scam and fraud schemes was USD 12.5 billion in 2023. Apparent Ponzi and pyramid schemes were the largest subcategory of frauds, receiving around USD 6.6 billion over the course of the year. Proceeds from apparent pig butchering, in which criminals use psychological manipulation to defraud victims through fake investment schemes was USD 4.4 billion in 2023. 

Houston FBI, according to a recent local news report, is receiving new complaints weekly. “They will take everything that they can get their hands on,” Heith Janke, former Special Agent in Charge of the FBI’s Houston Office and current Chief of the FBI Cyber Section explained in the report, "We have seen people lose their entire life savings. We’ve seen elderly lose their entire retirement accounts due to this scam.”

While this case is a great example of law enforcement tracing, tracking and seizing back funds for victims, as we wrote in a recent blog post, the best way to disrupt a scam is to stop it from happening in the first place. Protect yourself, your friends and family members from cryptocurrency investment or romance scams. Here are some red flags to watch for:

🚩 Guaranteed, oversized returns;

🚩 The more money you commit, the more you are guaranteed in return;

🚩 Loan offers, excessive margin, or matching funds;

🚩 You can only open an account with digital assets;

🚩 Claims customer assets are federally insured;

🚩 You’re invited to trade or invest by someone you’ve met online;

🚩 Unable to withdraw your money;

🚩 There is no physical address or customer service phone number;

🚩 There is no legitimate social media presence;

🚩 You are contacted by the investment platform via social media, text message, WhatsApp or other messaging application;

🚩 The business is sending you screenshots of wallet balances;

🚩 Offers to help you buy crypto "hassle free!" or "we'll keep your assets safe" by unregulated third party intermediaries or unregulated exchanges;

🚩 An official looking email from *your* exchange asking you to click on a link and input your login details (user name + password / share your private key);

🚩 Beware of FOMO panic buying - when adding fiat to your wallet, if the exchange's account cannot be confirmed by your bank, transfer a small amount & make sure it arrives into your wallet before transferring a larger amount.

Congratulations to the Houston PD and other federal, state and local law enforcement agencies who are on the frontlines of investigating and stopping fraud and financial crime in the growing cryptocurrency ecosystem, and remember, if it sounds too good to be true, it likely is.