Fake Crypto Apps Scammed Investors out of Over $42 Million, FBI Says

The Bitcoin logo appears on the display screen of a cryptocurrency ATM in Salem, N.H., on Feb. 9, 2021. Charles Krupa/AP Photo

The FBI issued a warning to U.S. investors and financial institutions about cyber criminals targeting cryptocurrency markets with fraudulent schemes, resulting in hundreds of people losing millions of dollars in these activities.

“The FBI has observed cyber criminals contacting U.S. investors, fraudulently claiming to offer legitimate cryptocurrency investment services, and convincing investors to download fraudulent mobile apps, which the cyber criminals have used with increasing success over time to defraud the investors of their cryptocurrency. The FBI has identified 244 victims and estimates the approximate loss associated with this activity to be $42.7 million,” the agency said in the report (pdf) published on July 18.

Between Dec. 22, 2021, and May 7, 2022, at least 28 victims were defrauded of around $3.7 million by criminals who posed as legitimate financial institutions. Victims used the apps suggested by the fraud actors and deposited cryptocurrencies into their wallets. When 13 victims tried to withdraw funds, they were asked to pay taxes. Even after paying the tax, the funds could not be withdrawn.

Four victims were defrauded of approximately $5.5 million between Oct. 4, 2021, and May 13, 2022, by cyber criminals who operated under the company name YiBit, a former cryptocurrency exchange. Two others were defrauded by criminals who posed as members of a company called Supayos.

The FBI recommended financial institutions to “proactively warn” their customers about such fraudulent activity, inform customers about whether they even offer cryptos, and periodically conduct online searches to look for misuse of company name, logo, etc. for unauthorized activity.

Crypto Frauds

The FBI warning comes as the agency recently added German citizen “Cryptoqueen” Ruja Ignatova to its list of the 10 most-wanted fugitives. Ignatova was charged with eight counts back in 2019 and is accused of defrauding investors out of $4 billion through OneCoin, a fake cryptocurrency.

According to a Consumer Protection Data Spotlight news release (June 3) by the U.S. Federal Trade Commission (FTC), there has been an explosive increase in cryptocurrency fraud losses during these past years.

While $12 million in losses were reported in 2018, this jumped to $33 million in 2019, $130 million in 2020, and $680 million in 2021. In the first quarter of 2022 alone, losses already have totaled $329 million.

“Since the start of 2021, more than 46,000 people have reported losing over $1 billion in crypto to scams—that’s about one out of every four dollars reported lost, more than any other payment method. The median individual reported loss? A whopping $2,600,” the news release said.

The top cryptocurrency used by victims to pay scammers was Bitcoin, at 70 percent, followed by Tether, at 10 percent, and Ether, at 9 percent. Bitcoin was trading at $23,198 as of 12:34 p.m. EDT, July 22, down 51.40 percent year to date.