FBI Issues Warning Against Fake Law Firms Scamming Crypto Fraud Victims

The FBI building in Washington on June 28, 2023. (Madalina Vasiliu/The Epoch Times)

The FBI issued an alert warning victims of cryptocurrency scams that criminals could target them by promising to recover the stolen funds, only to later defraud them.

Fraudsters have been posing as lawyers representing fictitious law firms and contacting crypto scam victims, claiming that they are authorized to investigate fund recovery cases, the FBI warned in a June 24 public service announcement. The fraudsters use social media and other messaging platforms to get in touch with vulnerable targets.

“To validate the contact, the ‘lawyers’ claim they are working with, or have received information on, the scam victim’s case from the FBI, Consumer Financial Protection Bureau (CFPB), or other government agency. In some instances, scam victims have contacted fraudsters on fake websites, which appear legitimate, hoping to recover their funds,” the FBI stated.

Between February 2023 and February 2024, cryptocurrency fraud victims were scammed out of more than $9.9 million by fictitious law firms, according to the FBI Internet Crime Complaint Center (IC3).

The fake lawyers ask victims to submit personal information or banking information to verify identities or get back their money. The criminals request their fees to be paid upfront in part, with the remaining paid after recovery. Victims may be asked to make payments to cover back taxes or other fees to recover their money.

“Law enforcement does not charge victims a fee for investigating crimes. If someone claims an affiliation with the FBI, contact your local FBI field office to confirm,” the agency stated.

The FBI advised people who are contacted by unknown individuals with the promise of recovering stolen cryptocurrency not to reveal any personal information or send money.

The agency initially warned about the scam in August 2023. At the time, the FBI said that recovery companies in the private sector “cannot issue seizure orders to recover cryptocurrency.”

Cryptocurrency exchanges can freeze accounts only based on internal decisions or as a response to a legal process. To recover any funds lost in crypto scams, the victims have to pursue civil litigation, according to the agency.

Investment fraud involving cryptocurrencies rose to $3.96 billion in 2023 from $2.57 billion in 2022, an increase of 53 percent, according to an FBI report. In March 2023, the agency warned of a “spike” in crypto investment schemes seeking to defraud U.S. citizens.

Recycling Victims

According to the Commodity Futures Trading Commission, an independent federal agency that regulates the U.S. derivatives markets, a common tactic of recovery-fraud scammers is to target their existing victims. After fraudsters misappropriate funds from the victim, they then proceed to gain access to their personal information.

The scammers hold on to this information for a few months and then get back to the victim, promising to recover the stolen funds. Victims are contacted via phone call or email, with the scammers posing as government officials, recovery-service representatives, or attorneys.

“In most cases, the fraudsters claim to have the money already in hand, or are working with the court to distribute the funds,” the Commodity Futures Trading Commission states on its website. “In other cases, the victims are told that the fraudsters who took their money have been tracked down and the caller is notifying victims to begin a civil court action.”

“Sometimes, victims are told that most or all their money will assuredly be returned if they first pay a small donation, retainer, or overdue taxes. However, after making the first payment, requests for more funds often follow.”

According to a 2023 report by the Institute for Marketplace Trust, investment/cryptocurrency scams topped the list of “riskiest scams” last year. A high percentage of people victimized by these scams reported a monetary loss, with 80.4 percent suffering losses.

In May, two Chinese nationals were charged by the U.S. Department of Justice for an alleged cryptocurrency scam that laundered more than $73 million from victims. The duo are accused of taking part in a “pig butchering” scam.

In this scam, a fraudster builds up a trustworthy relationship with potential victims and then persuades them to make crypto investments. After the investment is made, the scammers cut off contact and abscond with the stolen money.