The Best Way to Disrupt a Scam is to Prevent it From Happening in the First Place

“The best way to disrupt a fraud scheme is by preventing it from ever happening,” explained former United States Secret Service Special Agent Casey Dougherty. This week, Mr. Dougherty, now part of TRM’s Global Investigations team, was contacted by a former colleague whose family member was a victim of a crypto-related fraud scheme.

Scammers contacted the victim through a social media platform as a potential romantic partner. After some messaging on the platform, the conversation was moved to Telegram where the scammers mentioned that he or she does not have to work anymore due to cryptocurrency investments. The scammers eventually encouraged the victim to invest. Despite the victim’s reluctance, the scammers talked the victim into investing and walked the victim through opening an account on a virtual currency exchange and moving funds from the exchange to a personal crypto wallet. The scammers then sent “profits” to the new wallet tripling the victim’s initial investment in an attempt to demonstrate the successful investing strategy. 

At this point, Mr. Dougherty was contacted by the victim’s family. Mr. Dougherty explained to the victim that their money was still safe, as the scammers did not have access to their private keys or seed phrases, and that the scammers would likely ask for these things. The next day, despite the warning, the victim provided a screenshot of the seed phrase to the scammers in order to “secure the investment.” However, after having sent the seed phrase, the victim remembered Mr. Dougherty’s warning and, with Mr. Dougherty’s assistance, was able to move the funds to a different wallet before the scammers were able to steal them. This was likely due to a bit of luck and a significant time zone difference. The scammers, at that point, could only send a few angry messages and cut off communications.

“The fraudsters are incredibly savvy and practiced at how to play on people’s emotions and take advantage of their kindness. I’m just glad I was able to connect with my old colleague and provide resources to help prevent a larger fraud.”

Law enforcement agencies all over the world are facing the same issue - the growing need to educate people to recognize a fraud scheme before they fall victim. The FBI’s IC3 reporting center tracked over $2.5 billion worth of cryptocurrency fraud schemes in 2022. It received victim complaints from every U.S. state and dozens of foreign countries. The fraud schemes varied from romance frauds, to extortion schemes, and fictitious investment schemes.

According to TRM’s Illicit Crypto Ecosystem Report approximately $9.04 billion was sent to various types of fraud schemes in 2022, with the large majority going to apparent Ponzi or pyramid schemes.

But, this was not one of these cases. The scammer was not successful, although it was close, because the victim had been educated by Mr. Doherty on the red flags, exactly what the scammer would say, and how the scammer would apply pressure to any resistance by the victim.

Staying proactive to stop scams and fraud

As this case exemplifies, the best way to disrupt financial crime is to cut it off at the placement stage through education and raising awareness.

Here are a few tips:

• Never send cryptocurrency to someone you don't know or trust. This includes people you meet online, even if you have been communicating with them for a long time.
• Be wary of anyone who promises high returns with little or no risk. These are often signs of a scam.
• Do your research before investing in any cryptocurrency project. Make sure the project is legitimate and has a good track record.
• Never give out your private keys or seed phrases to anyone. These are the keys to your cryptocurrency wallets, and if someone has them, they can steal your funds.

Education and information sharing on scams is why TRM launched our open source fraud and scam reporting platform, Chainabuse. Anyone can view, search and file fraud reports on Chainabuse, or check addresses and entities they interact with to understand whether they might be exposed to illicit activity. We also provide free, instant support to victims and use the reports to work with law enforcement authorities where appropriate. Chainabuse is the world’s largest repository of crypto scams and fraud data, with close to 500,000 reports filed to date. If you fall victim to fraud or scam involving crypto, report it at Chainabuse.com. 

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