Crypto crime wave: FBI reports 53% rise in 2023, losses near $4b

The Federal Bureau of Investigation’s (FBI) 2023 Internet Crime Report sheds light on an alarming surge in cryptocurrency-related investment fraud.

According to the report, crypto scams accounted for 86% of all investment fraud losses in the U.S., amounting to $3.94 billion.

That’s a 53% increase from 2022, when multiple crypto scams plagued the sector, including the $32 billion collapse of FTX and the $4.7-billion bankruptcy of Celsius (the founders of both of those companies faced fraud charges).

This surge in crypto-related fraudulence aligns with a broader trend of escalating online financial deceit. The Internet Crime Complaint Center (IC3) documented a staggering total of over $12.5 billion in online fraud losses. 

The report detailed how investment scams — propelled primarily by crypto scams — jumped 38% to reach $4.57 billion. It also revealed that cybercriminals are increasingly leveraging the anonymity and rapid transaction capabilities of digital currencies, including Bitcoin (BTC), as well as meme coins like Dogecoin (DOGE), and Shiba Inu (SHIB).

Executing schemes is becoming easier, the FBI says. Scams can range from business email attacks ($2.9 billion in losses) to more intricate impersonations and phishing operations.

What makes the 2023 outbreak of crypto fraud particularly noteworthy are the precise lengths to which perpetrators have gone.

FBI: Fraudsters are evolving 

According to the FBI, culprits utilize custodial accounts at major financial institutions, crypto exchanges, and third-party payment processors as conduits for their scams.

This strategy not only facilitates the swift dispersal of illicitly obtained funds but also complicates the tracing and recovery processes.

The exponential growth of these crimes can also be seen through a global lens, with the FBI’s findings resonating beyond the U.S. borders, for instance, Germany’s significant seizure of over $2 billion in Bitcoin from piracy proceeds.

The assets seized by the German government stemmed from the operations of a website identified in previous investigations as “Movie2k.” This site was known for streaming pirated films and has been one of Germany’s most frequented online destinations for such content since its inception in 2008. 

By distributing more than 880,000 pirated movies, its operators profited from advertising and subscription fees. Identified suspects include a Berlin-based programmer and real estate tycoon, who have since been arrested on charges of commercial money laundering.

Others who have been arrested include two people from Germany and Poland believed to have accrued Bitcoin through the site’s earnings until its shutdown in 2013. 

One of the suspects has reportedly taken a step toward restitution by voluntarily transferring the disputed Bitcoin to the Federal Criminal Police Office’s (BKA) wallet, following which the fate of these funds now awaits a judicial decision.

Earlier that same month, U.S. authorities announced their plan to sell off Bitcoin worth around $132.5 million, confiscated during the investigation of the notorious Silk Road marketplace. 

The District Court in Maryland unveiled plans to liquidate the seized digital currency, a sum that was amassed from two major busts involving Ryan Farace and Sean Bridges. 

Specifically, Farace’s stash — amounting to 2874.904256 Bitcoin (valued at $129,251,164.54) — was secured in Memphis, Tennessee, on Feb. 10, 2021. Another batch, comprising 58.742155166 Bitcoin (worth about $3,304,833.65), was taken from Farace in Arlington, Virginia, on May 11, 2021. 

In parallel, financial institutions are taking definitive steps to mitigate the risks associated with cryptocurrency transactions. Notably, JPMorgan Chase & Co.’s decision to halt crypto transactions for its U.K. clients underscores the growing apprehension surrounding these digital assets. 

This proactive stance was aimed at safeguarding consumers from the escalating threats posed by crypto-related fraud, which has seen a dramatic uptick in consumer losses, soaring past 40% in the U.K. alone.