Investors worldwide have pumped trillions into digital currency, eager to capitalize on market gains. But, criminals are also keen to use the hype around cryptocurrency for their own benefit.
Crypto crime is growing quickly. In 2021, the Canadian Anti-Fraud Centre received reports of cryptocurrency fraud losses totalling $75 million. Between 2018 and 2020, investment scams tied to crypto accounted for $12.6 million in reported losses.
RCMP officers are countering cryptocurrency fraud by following digital leads and rapid advancements in digital currency tracing. They're up against tech-savvy fraudsters who steal by demanding victims make payments using cryptocurrency ATMs and QR codes to convert traditional currency into digital currency.
We're aware of the bad guys sending victims to cryptocurrency ATMs to make transactions. They've even stayed on the phone to guide the victim through the process," says Cpl. Vinh Ngo, a member of the RCMP's Federal Policing Prevention and Engagement Unit in British Columbia.
Criminals are also using tried-and-true methods to manipulate people over the phone and email, such as:
- claiming to be a government official and threatening dire consequences if a fee is not paid
- cultivating a friendly online relationship with the victim then suddenly demanding money to solve a personal problem
- announcing the victim has won a prize that can only be claimed by paying
When these sorts of scams happen, they have nothing to do with a victim's intelligence. They have everything to do with emotion," adds Ngo.
Show me the digital money
A cryptocurrency is a digital asset that can be exchanged for goods and services. There are thousands of cryptocurrencies and, for many investors, they are considered commodities that can rise and fall in value.
The price of a Bitcoin, for instance, was recently trading at more than $60,000 CDN. However, in the space of a year, its price dropped to lows of about $24,000 and soared to the $80,000 range.
The number of cryptocurrencies continues to increase and the number of investors also continues to grow," says Sgt. Kris Clark, who works with the RCMP's Federal Serious & Organized Crime Unit.
Unfortunately, the general knowledge base does not seem to be keeping up with the number of adopters. If people are interested in investing in crypto or any other investment, they should use legitimate, knowledgeable and trusted sources, not advice from people on social media, and they should learn before they buy," says Clark.
Strengths and weaknesses
Cpl. Colin Paul works with the RCMP's Federal Serious & Organized Crime Financial Integrity Unit.
He says cryptocurrency transactions, especially those involving Bitcoin, are not as anonymous as people think. That's because transactions from one wallet — where the cryptocurrency is stored — to another, are tied to a blockchain. This public list of all dealings also determines its value as a digital asset.
Of course criminals are aware of this and look for ways to navigate around it," says Paul.
To accomplish that, they will first get the victim to purchase an accessible cryptocurrency such as Bitcoin. From that point, Paul says criminals have multiple options to obscure their transactions, including moving the cryptocurrencies across international borders or converting them into traditional money.
We do have means to track and trace these transactions, if we act fast," says Paul. "
But once the transaction is completed, it is hard to reverse."
Do your research
Ontario Provincial Police A/Det. Sgt. John Armit works in Ottawa with the Canadian Anti-Fraud Centre as a Liaison Officer to support police services with their cyber-enabled frauds and cryptocurrency investigations.
Larger police agencies, such as the RCMP, have developed their own guidelines for officers to follow cryptocurrency investigations.
My job is to provide investigators who ask, support for their investigations," says Armit. "
We need to increase awareness to members and the public to the fact that cryptocurrencies are used widely in all forms of criminal activities."
Meanwhile, Armit says the public needs to know the warning signs of crypto fraud, which are:
- investment opportunities with higher than normal returns
- unsolicited telephone, email or social media investment offers
- displays of urgency so you don't miss out
- suspicious messages from a trusted source, like a bank or family member, or
- cryptocurrency investments that are not registered with provincial or national securities regulators
If you fall victim to a fraud, contact your local police department and the Canadian Anti-Fraud Centre at 1-888-495-8501.