The Federal Bureau of Investigation (FBI) has warned the public about a new wave of cybercriminal activity targeting victims of cryptocurrency scams. These fraudsters are posing as lawyers and law firms, offering bogus cryptocurrency recovery services to steal funds and personal information from those already defrauded. This latest cryptocurrency investment scam alert is an update to a previous warning from the FBI's Internet Crime Complaint Center (IC3), which had highlighted a surge in scams involving fake services for recovering digital assets. The updated Public Service Announcement (PSA), titled "Increase in Companies Falsely Claiming an Ability to Recover Funds Lost in Cryptocurrency Investment Scams," was originally published on August 11, 2023. Moreover, in April 2024, the FBI warned of financial risks tied to using unregistered cryptocurrency transfer services, highlighting potential law enforcement actions against these platforms. The announcement focused on crypto transfer services operating without registration as Money Services Businesses (MSBs) and non-compliance with U.S. anti-money laundering laws. These platforms are often targeted by law enforcement, especially when used by criminals to launder illegally obtained funds, such as ransomware payments.

Cryptocurrency Scam: Emerging Criminal Tactic

The FBI's announcement aims to inform the public about a new criminal tactic designed to exploit cryptocurrency scam victims further. Using social media and other messaging platforms, fraudsters posing as lawyers from fictitious law firms are contacting scam victims and offering their services. These "lawyers" claim they have the authority to investigate fund recovery cases and often assert that they are working with, or have received information from, the FBI, Consumer Financial Protection Bureau (CFPB), or other government agencies to validate their legitimacy. In some instances, victims have reached out to these scammers through fake websites that appear legitimate, hoping to recover their lost funds. The scammers use various methods to further the recovery scam, including:

• Verification Requests: They ask victims to verify their identities by providing personal identifying information or banking details.
• Judgment Amount Requests: They request that victims provide a judgment amount they are seeking from the initial fraudster.
• Upfront Fees: They demand a portion of the fees upfront, with the balance due upon recovery of the funds.
• Additional Payments: They direct victims to make payments for back taxes and other fees purportedly necessary to recover their funds.
• Credibility Building: They reference actual financial institutions and money exchanges to build credibility and further their schemes.

Between February 2023 and February 2024, cryptocurrency scam victims who were further exploited by these fictitious law firms reported losses totaling over $9.9 million, according to the FBI Internet Crime Complaint Center (IC3).

Tips to Protect Yourself

The FBI offers several tips to help individuals protect themselves from falling victim to these scams:

• Be Wary of Advertisements: Be cautious of advertisements for cryptocurrency recovery services. Research the advertised company thoroughly and be suspicious if the company uses vague language, has a minimal online presence, and makes unrealistic promises about its ability to recover funds.
• Do Not Release Information: If an unknown individual contacts you claiming to be able to recover stolen cryptocurrency, do not release any financial or personal identifying information, and do not send money.
• No Fees from Law Enforcement: Remember that 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 their legitimacy.

Victim Reporting

The FBI urges victims to file a report with the Internet Crime Complaint Center. When filing a report, try to include the following information:

• Contact Information: Details about how the individual initially contacted you and how they identified themselves, including name, phone number, address, email address, and username.
• Financial Transaction Information: Details such as the date, type of payment, amount, account numbers involved (including cryptocurrency addresses), name and address of the receiving financial institution, and receiving cryptocurrency addresses.

The FBI's announcement highlights the importance of vigilance and caution when dealing with unsolicited offers of assistance, particularly in the highly targeted and vulnerable area of cryptocurrency investments. By staying informed and following the FBI's guidelines, individuals can better protect themselves from becoming victims of these crypto scams.

The U.S. Attorney today announced charges against three UK nationals for their involvement in the “Evolved Apes” NFT fraud scheme. The United States Attorney for the Southern District of New York Damian Williams and James Smith, the Assistant Director of the New York Field Office of the FBI, announced the unsealing of an indictment charging three UK nationals: Mohamed-Amin Atcha, Mohamed Rilazh Waleedh, and Daood Hassan, with conspiracy to commit wire fraud and money laundering.

“Evolved Apes” Rug Pull Scam

The charges are in connection to their scheme of defrauding victims through the sale of non-fungible tokens (NFTs) from the “Evolved Apes” collection. According to the indictment, Atcha, Waleedh, and Hassan orchestrated a “rug pull” scam in the fall of 2021. In crypto vocabulary a rug pull is a type of exit scam in which developers first raise money from investors through the sale of tokens or NFTs and then abruptly shut down the project vanishing away with the raised funds. Evolved Apes was a collection of 10,000 unique NFTs. They advertised the NFT project in a way where the funds raised would be used to develop a related video game that would in turn increase the NFTs' value. The promised video game never materialized as the anonymous developer "Evil Ape" vanished a week after its launch, siphoning 798 ether [approximately $3 million at today's market price and $2.7 million at the time] from the project's funds. The trio then laundered the misappropriated funds through multiple cryptocurrency transactions to their personal accounts, the indictment said.

“As alleged, the defendants ran a scam to drive up the price of digital artwork through false promises about developing a video game. They allegedly took investor funds, never developed the game, and pocketed the proceeds. Digital art may be new, but old rules still apply: making false promises for money is illegal.” - Williams

Williams said thousands of people were tricked into believing in their false promises and thus bought these NFTs. But "NFT fraud is no game, and those responsible will be held accountable,” he stated. FBI Assistant Director James Smith called out the trio for "ghosting customers" and perpetrating the NFT scam "out of a selfish desire for a quick profit.”

"[This] not only reflects poor business integrity, it also violates the implicit trust buyers place in sellers when purchasing a product, no matter if that product is in a store or stored on a blockchain." - Smith

Atcha, Waleedh, and Hassan, all aged 23, are charged conspiracy to commit wire fraud and money laundering, both of which carries a maximum sentence of 20 years in prison. The actual sentences will be determined by a judge based on the U.S. Sentencing Guidelines and other statutory factors.

Rug Pulls and their Murky History

Rug pulls and cryptocurrency scams have reportedly cost people $27 billion till date. Total number of such incidents stands at 861 with the largest rug pull so far being that of OneCoin which was costed $4 billion in stolen funds. OneCoin, at its peak, was thought to have more than 3 million active members from across the globe. To date it is believed to be the most “successful” crypto scam as search continues for its perpetrator the “Cryptoqueen” Ruja Ignatova. She was added to the FBI’s ‘Ten Most Wanted Fugitive List’ in July 2022 - where she remains today.

The Missing Cryptoqueen was reported dead in unconfirmed reports but an investigation from the BBC team, whose results were published last week, said the investigating team received details on Ignatova’s various sightings and whereabout tip-offs even after her alleged murder took place. She allegedly has links with the Bulgarian underworld, whom she also entrusts with keeping her physically safe.