Officials Warn About Crypto Scam Where Genuine Appearing Sites Show Fake Profit

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The mobile app showed a profit of $2.8 million in what appeared to be a hot trading day on the Singapore exchange. But whenever the merchant tried to withdraw funds in the United States, she faced customer service representatives asking for payments of mysteriously high taxes or fees, according to court documents.

US authorities say it’s a sophisticated new scam that drains millions of dollars from people who let their guard down online. Far from earning $2.8 million, the trader invested $9.6 million into the platform this year before it all disappeared, according to court documents.

In a court filing in November, the Secret Service said that five US victims reported being tricked into investing large sums of money in cryptocurrency this year by scammers who created seven identical domains by spoofing the Singapore International Monetary Exchange website. Scammers also created a smartphone app that mimics what merchants use on legitimate platforms, officials said.

According to a warrant filed in federal court in the Eastern District of Virginia as part of the seizure of the sites last month, a victim in Richmond lost $289,000. Another, in Los Angeles, was drained of over $200,000. The Redmond, Washington, brokerage, which thought it raked in $2.8 million in one day in July, said her account showed a total profit of around $7 million.

But the “commercial profit” displayed on its app was an illusion, according to US officials.

“After numerous attempts to withdraw their investments, they were unable to recover any portion of their cryptocurrency investment,” a Secret Service agent claimed in the court filing in November.

Investigators call this a “pig-slaughter” scheme. Scammers find targets on dating apps, social media or through text messages sent to a “wrong number”. They establish relationships with targets and slowly gain their trust, eventually floating the possibility of a cryptocurrency investment. Once money is sent to a fake investment app, the scammer disappears with the funds.

An ex-policeman fell in love with Alice. Then he fell for his $66 million cryptocurrency scam.

Jason Kane, deputy assistant director of the US Secret Service’s Office of Investigations, called him “the next generation of the long con.”

“The American public should be aware of the dedication these criminals have to defraud people of their hard-earned money,” Kane said in a statement. “Fraudsters can identify their victims and coerce them to make investments, producing so-called returns on investments to solicit new investments. The public should be vigilant in their online activities, aware of who they are interacting with, and wary of any solicitation of funds from an unknown source.”

The FBI said that the scam originated in China in late 2019. But by 2021, the FBI’s Internet Crime Complaint Center received more than 4,300 annual complaints related to crypto-romance scams, which resulted in more than $429 million in losses.

“Scammers are using translation programs to communicate seamlessly with their victims,” ​​the FBI said in a press release. “Victims have very similar stories: by meeting someone on a dating app, the scammer gains the victim’s trust and then claims to have knowledge of cryptocurrency investments or trading opportunities that will result in substantial profits. The victim is then directed to transfer large amounts of cryptocurrency from the exchange account to cryptocurrency wallets controlled by fraudsters, ultimately losing everything.”

The Washington state merchant said she communicated with a scammer via LINE, a Japanese chat app, and WeChat, a Chinese app. The warrant request does not describe how the two met.

Her first investment was $400, officials said, but days later she poured another $100,000 into the platform and ended up losing $9.6 million in total. She said “customer service representatives” would make requests for “taxes” or “fees” whenever she attempted to withdraw funds from her account, according to the warrant request.

In May, a representative of the fake Singapore exchange told the trader that “according to the Financial Income Tax Act, if the total profit for the day exceeds 100% of the principal amount of the transaction, you need to pay 30.6% of the amount from personal income tax earnings,” US officials said. That meant paying another $570,384 in taxes, according to court records.

“Please pay as soon as possible, after payment we will deduct the tax for you, thank you!” said the representative.

After the merchant made the alleged income tax payments and tried to withdraw funds, she was told the following month that she had “received 33 abnormal bitcoins” and “your account now belongs to the abnormal state… in any illegal behavior,” reads the warrant request.

That’s when the merchant “determined it was a scam and stopped making investments,” according to court filings.

US officials said the investigation into the counterfeiting of the Singapore exchange is ongoing. Federal prosecutors did not identify the suspects by name. Authorities said that people who believe they may be victims of a cryptocurrency scam should contact CryptoFraud@SecretService.gov or visit IC3.gov to file a report.

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