US officials say it’s a new and sophisticated scam that’s siphoning millions of dollars from people who discount online. Far from making $2.8 million, the retailer invested $9.6 million in the platform this year before it all disappeared, according to court documents.
In a court filing in November, the Secret Service said five American victims reported being tricked into investing large sums in cryptocurrencies this year by fraudsters who created seven identical domains by spoofing the website of the Singapore International Monetary Exchange. Fraudsters have also created a smartphone app that mimics what traders use on legitimate platforms, officials said.
One victim in Richmond lost $289,000, according to an order filed in federal court in the Eastern District of Virginia as part of the website seizure last month. Another, in Los Angeles, was squeezed for more than $200,000. A trader from Redmond, Wash., who thought she made $2.8 million in one day in July, said her account showed a total profit of about $7 million.
But the “trading profits” shown on her app were an illusion, according to US officials.
“After numerous attempts to withdraw their investments, they were unable to recover even a single portion of their cryptocurrency investment,” a Secret Service agent said in a court filing in November.
Investigators call it a “pig slaughter” scheme. Scammers find targets on dating apps, social networks or through text messages sent to the “wrong number”. They establish relationships with targets and slowly gain their trust, eventually offering the opportunity to invest in cryptocurrencies. Once the money is sent to the fake investment app, the scammer disappears with the funds.
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Jason Kane, deputy assistant director of the US Secret Service’s Bureau of Investigation, called it “the next generation of long fraud.”
“The American public needs to be aware of the dedication these criminals are committed to defrauding people of their hard-earned money,” Kane said in a statement. “Fraudsters can identify their victims and force them to invest, creating so-called returns on investment to encourage further investment. The public must be cautious in their online activities, aware of who they are communicating with and suspicious of any fundraising from an unknown source.”
The FBI said the scam originated in China in late 2019. But by 2021, the FBI’s Internet Crime Complaint Center had received more than 4,300 annual complaints related to crypto-romance scams, resulting in more than $429 million in losses .
“Scammers use 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 investment or trading opportunities that will result in significant profits. The victim is then directed to transfer large amounts of cryptocurrency from the exchange account to cryptocurrency wallets controlled by the fraudsters, ultimately losing everything.”
The Washington state merchant said she communicated with the scammer through LINE, a Japanese chat app, and WeChat, a Chinese app. The warrant application does not describe how the two met.
Her initial investment was $400, authorities said, but a few days later she invested another $100,000 in the platform, eventually losing a total of $9.6 million. She said “customer service representatives” would ask for “taxes” or “fees” whenever she tried to withdraw funds from her account, according to the warrant request.
In May, a representative of a fake Singapore exchange told a trader that “under the Financial Income Tax Act, if the total profit of the day exceeds 100% of the principal amount of the transaction, you have to pay 30.6% of the profit amount in personal income tax,” US officials said. That meant paying an additional $570,384 in taxes, according to court records.
“Please pay as soon as possible, after payment we will deduct your tax, thank you!” said the representative.
After the merchant made alleged income tax payments and attempted to withdraw the funds, she was told the following month that she had “received 33 abnormal” bitcoins and “your account now belongs to an abnormal balance … you must pay 33 BTC as a security deposit, in order to be certain that you are not involved in any illegal conduct,” the request for the warrant said.
That’s when the trader “determined it was a scam and stopped investing,” according to court records.
U.S. officials said an investigation into the fraudulent Singapore exchange is ongoing. Federal prosecutors have not identified the suspects by name. Officials said people who believe they may be victims of cryptocurrency fraud should contact [email protected] or visit IC3.gov to file a report.