Mega Investment Fraud Schemes Pervasive Despite ‘Crypto Winter’

TRM Labs continues to track several “mega” investment fraud schemes that have received more than $100 million in crypto payments in 2022 despite this year’s steep decline in the crypto market. TRM has identified at least $4.461 billion in incoming volume between January and October 2022 related to these types of schemes, of which 11 of the largest schemes accounted for about 75% of the total amount. On-chain and off-chain analysis of these alleged large fraud schemes suggest that several of the schemes are iterations or copycats of previous schemes that had shut down and are now starting up again under different names – or in some cases, the same name.

Victims Promised Quick, High Returns 

Most of the “mega” investment schemes appear to be pyramid or Ponzi schemes operating on a number of blockchains, including Tron, Bitcon, Ethereum, Polygon, and BNB Chain (formerly Binance Smart Chain). Nearly all of these schemes included a pyramid-like referral program that advertised large commissions for users who referred others, often advertising high daily returns on investments in the range of 0.5 - 2 percent. 

• Five of the schemes referenced automated trading software that would return profits for users, while four referenced having experienced professional traders conducting trades on behalf of users to generate profits. 

• Juicy Fields and Entity 7 advertised marijuana/hemp farming as an investment on a large part of their platforms. Media reports, however, suggest the plants never existed. 
• Entity 2 and 5 used a trading platform called MetaTrader 4 and MetaTrader 5 as part of their schemes, which is also common in lower volume schemes and some pig butchering scams. MetaTrader was recently banned by the Apple App Store.

Tron Blockchain Growing in Popularity for Mega Frauds

On-chain analysis indicates the “mega” schemes were most common on Tron, which is consistent with the trend for all fraud scheme types. Out of the total incoming volume for the largest 11 mega investment fraud schemes TRM has tracked this year, 59.95% were on Tron, mostly via USDT. 

• Four of the schemes of the 11 mega fraud schemes were primarily or entirely on Tron, including the two largest.
• Other schemes were primarily offered on Ethereum, Bitcoin, and BNB chain. The cross-chain nature of the schemes highlights the need for cross-chain analytics when investigating fraud.

TRM also identified a “mega” fraud scheme on Polygon for the first time. Meta Force was reportedly created by the same individuals who created and operated Forsage, which the U.S. Securities and Exchange Commission has alleged to be a “fraudulent crypto pyramid and Ponzi scheme.” As of early November, the new scheme has received about $240 million in DAI since it was launched a few months ago.

Methodology

TRM researchers evaluate cryptocurrency investment schemes based on a set of indicators determined to be highly indicative of fraud.

The most common indicator is that the advertised returns are above a realistic threshold. We also examine the advertised source of these profits to determine if they appear to be legitimate. The second most common indicator is a pyramid-like referral structure, where users get most or all of their returns solely by recruiting other investors. 

TRM also investigates a number of other criteria, such as the purported operators of the scheme, website metadata, and public scam reports such as those submitted to Chainabuse.

To calculate incoming volume, TRM analyzes the value of transfers to blockchain addresses associated with the fraud schemes, excluding internal volume between addresses in the fraud scheme. Incoming volume may be impacted by the number of investors that participate in the fraud scheme, the marginal price of the assets involved, the extent to which fraud scheme operators spoof on-chain incoming volume in order to appear legitimate, and whether the fraud scheme’s addresses are used exclusively for the fraud scheme or are used by other entities. 

What to do if you have been scammed

If you believe you have been defrauded:

1) If you use an exchange, contact it immediately

2) If the transaction was conducted via a payment processor, contact that service immediately. There is a very small chance your funds can be recovered if you act quickly.

3) After this step, make a report to your local and national law enforcement agencies. If you are located in the U.S., this would be your city, county, and/or state agencies in addition to filing a report with the FBI via IC3.gov and the FTC via reportfraud.ftc.gov.

4) Additionally, you can report the fraud on Chainabuse.com. Doing so will help prevent other individuals from being defrauded, and it can also help law enforcement as they investigate the fraudsters. 

About TRM Labs

TRM provides blockchain intelligence to help financial institutions, cryptocurrency businesses, and public agencies detect, investigate, and manage cryptocurrency-related fraud and financial crime. TRM's risk management platform includes solutions for transaction monitoring and wallet screening, entity risk scoring - including VASP due diligence - and source and destination of funds tracing. These tools enable a rapidly growing cohort of organizations around the world to safely embrace cryptocurrency-related transactions, products, and partnerships.

TRM’s Global Investigations team conducts and supports cryptocurrency investigations to combat illicit activity and build trust and confidence in the cryptocurrency economy. Our investigators use TRM Forensics to trace the flow of stolen assets and coordinate with relevant law enforcement partners.