The mobile application showed a profit of $2.8 million on what appeared to be a hot trading day on the Singapore Stock Exchange. But every time the merchant tried to withdraw funds at home in the US, he was faced with customer service representatives demanding mysteriously high payouts or fees, according to court documents.
US officials say it’s a sophisticated new scam that siphons off millions of dollars from people who let their guard down online. Far from earning $2.8 million, the trader invested $9.6 million in the platform this year before it all fizzled out, according to court documents.
In a court filing in November, the Secret Service said five US victims said they were tricked into investing large sums in cryptocurrency this year by scammers who created seven identical domains by spoofing the Singapore International Monetary Exchange website. The scammers have also created a smartphone app that mimics what traders use on legitimate platforms, officials said.
According to a writ filed in federal court in the Eastern District of Virginia as part of the website seizure last month, one victim in Richmond lost $289,000. Another, in Los Angeles, was drained of more than $200,000. The Redmond, Washington trader, who thought he made $2.8 million in one day in July, said his account showed a total profit of about $7 million.
But the “trading profit” displayed on its app was an illusion, according to US officials.
“After numerous attempts to withdraw their investments, they have not been able to recover any portion of their cryptocurrency investment,” a Secret Service agent said in a court filing in November.
Investigators are calling it a “pig slaughter” scheme. Scammers find targets on dating apps, social media, or via text messages sent to the “wrong number”. They form relationships with targets and slowly gain their trust, eventually letting the possibility of a cryptocurrency investment emerge. Once the money is sent to a fake investment app, the scammer disappears with the funds.
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Jason Kane, deputy director of the United States Secret Service Bureau of Investigation, called it “the next generation of the long-running con”.
“The American public needs to be aware of the dedication these criminals have to defraud people of their hard-earned cash,” Kane said in a statement. “Fraudsters can identify their victims and force them to invest, producing so-called returns on investments to solicit further investments. The public must be vigilant in their online activity, aware of who they are interacting with, and suspicious of any request for funds 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 scams, resulting in losses of more than 429 million dollars.
“The 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 confidence, then claims they know about cryptocurrency investment or trading opportunities that will result in substantial profits. victim is then directed to transfer large amounts of cryptocurrency from the exchange account to cryptocurrency wallets controlled by scammers, ultimately losing everything.
The trader in Washington state said she communicated with a scammer via LINE, a Japanese chat app, and WeChat, a Chinese app. The warrant application does not describe how the two met.
His first investment was $400, authorities said, but days later he poured another $100,000 into the platform and ended up losing $9.6 million in total. She said “customer service representatives” would file requests for “fees” or “fees” whenever she attempted to withdraw funds from her account, according to the warrant request.
In May, a representative of the fake Singapore exchange told the trader that “according to the Financial Income Tax Act, if the day’s total profit exceeds 100% of the principal amount of the transaction, you must pay 30.6% of the amount of personal income tax profit,” U.S. officials said. That meant paying another $570,384 in taxes, according to court documents.
“Please pay as soon as possible, after your payment we will deduct the tax for you, thank you!” said the representative.
After the merchant made alleged income tax payments and attempted to withdraw funds, she was told the following month that she had “received 33 abnormal bitcoins” and “your account now belongs to the abnormal status… you have to pay 33 BTC as deposit collateral, to make sure you don’t engage in any illegal behavior,” the warrant application states.
It was then that the trader “determined it was a scam and stopped making investments,” according to court documents.
US officials said investigations into Singapore’s forged exchange were ongoing. Federal prosecutors have not identified the suspects by name. Officials said people who believe they might be victims of a cryptocurrency scam should contact CryptoFrau[email protected] or visit IC3.gov to file a report.