Over the past few years, there has been a proliferation of cryptocurrency investment scams.

According to the Federal Bureau of Investigation (FBI), losses from cryptocurrency-related investment fraud schemes reported to its Internet Crime Complaint Center (IC3) rose from $2.57 billion in 2022 to $3.96 billion in 2023, an increase of 53 percent. For example, a state member bank failed in July 2023 because of fraudulent activity related to an apparent cryptocurrency scheme.

Investment fraud schemes include confidence scams in which a perpetrator gains the confidence of individuals before eventually enticing them to make a fraudulent investment. Confidence scams related to cryptocurrency investments, colloquially known as “pig butchering,” are particularly disturbing because of their prevalence and the resulting financial devastation to victims. In September 2023, FinCEN published the FinCEN Alert on Prevalent Virtual Currency Investment Scam Commonly Known as “Pig Butchering,” which explains the scam methodology and provides red flag indicators to assist financial institutions in identifying and reporting related suspicious activity.

These schemes often feature a connection to cryptocurrencies, either as a purported investment or manner of value transfer, along with wire transfers or other payment methods. A common pattern involves the victim being convinced that they are in a trusted partnership with the scammer, who may then suggest fraudulent investments or create an elaborate scheme to lure the victim into sending funds. Banks may encounter these and other scams through a variety of channels, for example, customer interactions with bank staff, wire transfer monitoring, and suspicious activity monitoring systems.

These cryptocurrency investment schemes often involve the victim sending payments to cryptocurrency exchange wallets benefiting the perpetrator. As stated in FinCEN’s 2019 Advisory on Illicit Activity Involving Convertible Virtual Currency, convertible virtual currencies (CVCs) may create illicit finance vulnerabilities because of the global nature, distributed structure, limited transparency, and speed of the most widely utilized virtual currency systems.

FinCEN’s 2019 CVC advisory was issued to assist financial institutions in identifying and reporting suspicious activity concerning how criminals and other bad actors exploit CVCs for money laundering, sanctions evasion, and other illicit financing purposes. The advisory highlights prominent typologies and red flags associated with such activity and identifies information that would be most valuable to law enforcement, regulators, and other national security agencies in the filing of suspicious activity reports (SARs).

If you suspect you many have been a victim of a scam, please contact us immediately.