What Are Cryptocurrency Scam Investigations?

For many, cryptocurrency is the future, and society will eventually adopt and run on cashless transactions. With current economic chaos and uncertainty, many have turned their attention and have started to adopt cryptocurrencies.

There are more than 13,000 cryptocurrencies in circulation. These cryptos are classified into four major categories: payment currencies, tokens, stablecoins, and central bank digital currencies. They run on a decentralized network backed by blockchain technology. As a result, experts in cryptocurrency fraud investigations are required to differentiate genuine crypto from bogus ones.

Although there are several cryptos in the crypto market, many still prefer investing and trading in the first ever crypto to be created, Bitcoin, also referred to as crypto gold by many. It has the largest market cap, and as the fourth halving is approaching, there is a Bitcoin frenzy of buying. Many investors are ‘hodling’ or holding in crypto terminology.

As the Bitcoin price appreciates, the crypto market also appreciates due to its large market capitalization. Thus, besides buying and hodling on to Bitcoins, many are also diversifying into different cryptos. As the crypto buying fever is rampant, the chances of many falling victim to online crypto scams are high.

As per research, more than $39.6 billion was lost in cyberattacks in 2022 alone, compared to $23.2 billion in 2021. Surprisingly, these figures were $24.2 billion in 2023. Since VidiLook and Chia Tai exited the market, they were major contributing factors to the crypto scam. Thus, their exit had a profound impact on the amount lost in the crypto scams.*

Regardless, these are just the official figures, and they are bound to be greater as many shun away to report to the authorities regarding the crypto scam due to shame and guilt.

Contrary to the belief that cryptos lost in a scam cannot be recovered, this is completely wrong. Cryptos can be recovered; however, due to poor crypto regulation, many scammers and hackers continue to exploit the legal loopholes and stay away from the law.

In the absence of regulation, scammers are out there to rip off their potential victims; thus, it becomes necessary to at least secure their financial interests. As we have already seen from the above graph, these cryptocurrency crimes are increasing annually.

Thus, it becomes important to recover and return stolen crypto assets to their rightful owners through crypto investigations.

Cryptocurrency & It’s Sensitivity Explained

Although most are aware that a cryptocurrency is a digital currency, many are still confused and often ask, “What is a cryptocurrency?” Cryptocurrency is more than just digital currency. Crypto was conceptualized in 2007–08, during the last global recession.

Bitcoin, one of the first cryptocurrencies, was created with the single purpose of stopping corruption by making each coin accountable by minting it to a maximum of 21 million. Although bitcoins are mined through a mining rig rather than minting them, new Bitcoins are given as a reward to Bitcoin miners after authenticating and validating a crypto transaction. Each transaction is a complicated mathematical puzzle, and upon solving it, a new Bitcoin is mined.

Bitcoin was created with the sole aim of replacing centralized authorities like the central bank with a decentralized network called the nodes. These nodes are responsible for authenticating and validating each transaction.

When a transaction is authenticated, validated, and complete, it gets recorded on the blockchain technology across the nodes around the world. Since each transaction is recorded and spread across the globe, it is next to impossible to manipulate any transaction, thus ensuring transparency.

Crypto users have two keys with them when they create an account. These keys are similar to email addresses. One of the keys is called the private key, through which cryptos are sent, and the other is called the public key, which is used to receive cryptos. Both keys are made up of alphanumeric characters, thus ensuring anonymity when they buy, sell, or trade cryptos with other crypto users.

Types of Cryptocurrency Scams

There are several types of cryptocurrency scams, and falling victim to one of them is quite common. However, if you approach each business opportunity that involves cryptocurrency with skepticism, you are sure to avoid becoming a victim of a potential scam.

Investment Scam

As per crypto investigations, one of the most common online crypto scams is the investment scam. Scammers will entice their victims by ensuring a fake promise of making a huge amount of wealth by investing in bogus cryptos. These charlatans will lure in their potential victims by promising them unrealistic returns on their investments.

They will also entice them through Ponzi schemes and pyramid schemes by providing fake incentives only to encourage them to recruit more and more. When these schemes collapse since they cannot be sustained for a longer period, the victims involved not only lose their hard-earned wealth but also endanger their relationships with their family and friends.

Initial Coin Offering

It is a common practice in the crypto world to crowdfund a cryptocurrency. Creating a cryptocurrency involves a significant amount of resources, namely money. Scammers are well aware of and take advantage of such situations.

To attract crypto users through crowdfunding to create a fake cryptocurrency, they publish a fake white paper. Once this paper is released to the general population, most crypto enthusiasts will start to invest in the project.

Once a sufficient amount of money is collected, they run away without a trace.

Managed accounts

Not everyone is cut for trading, especially in the crypto market, where the price of crypto assets fluctuates more than 1000X within a short span of time. The crypto market disregards all the laws of economics except for the law of supply and demand. Thus, it is common practice for a broker to manage the accounts of their clients. While managing these accounts, brokers will ensure the financial interests of their clients.

Con artists impersonating financial brokers will always keep their financial interests before their clients. They will offer services like stock, forex, and crypto markets. But they all end up as stock scams, forex scams, and crypto scams. They will indiscriminately trade, disregarding whether the client is making a profit or a loss.

Crypto Exchanges, Brokers, or Brokerage Firms

According to crypto investigations, it has been observed that scammers will offer unrealistic returns for staking cryptos on their trading platforms. These bogus trading platforms are poorly managed and will misappropriate funds that have been pooled through their clients. These firms are elaborate Ponzi schemes and have been doomed since the start.

Such enterprises go bankrupt with their top management untouched by the law. At the end of the day, their clients are the ones to suffer financial loss, while these top management entities run away with the money.

Signal Trading and Insiders Tip

Scammers will frequently announce that they have a good tip that will turn the fortunes of their clients. They provide them with trading tips under the guise of an insider tip. In reality, it is a substandard research-based strategy that anyone can create with good experience trading in cryptos. Scammers sell these tips at a premium, and there is no guarantee that these so-called tips are reliable.

Trading bots

Trading bots are software programs that are created to execute trades that minimize losses while maximizing profit potential. A lot of time, effort, and money are spent to create these complicated applications that execute trades based on historical performance. These bots are field-tested and provide a more than 70% success rate.

According to crypto investigations, scammers provide a bogus crypto trading bot that is not field tested, and the win-to-loss ratio is atrocious. They provide their bogus bots at a competitive price. Using these substandard bots will only result in losses.

Romance Scam

Another way that these charlatans prey on their potential victims is through romance. These con artists will create a fake, attractive profile that can fool anyone. They will possess the above-mentioned attractive personality that has the sole aim of making a difference in the world and making it a better place to live.

No matter how they lure in their potential prey, they all end up in different ways. First, they will ask for money frequently in one way or another, and second, they will lure in the above-mentioned investment scams.

Social Media Scams

Con artists are known for their sweet talk to entice their potential victims through a web of lies. Once trapped, they will then start to bleed financially. As per cryptocurrency fraud investigations, it has been revealed that online celebrities will often influence their fanbase to promote certain obscure cryptos and lead them into financial insecurities.

Scammers are known to use rug-pull and pump-and-dump schemes to make quick money at the expense of their audience and fan base. They will first buy an obscure cryptocurrency in bulk and promote it on their social media platforms. Their audience will follow their lead and start to invest in those cryptos.

Once the price of the crypto has artificially inflated, and after appreciating a predetermined price, these charlatans will start to sell off those cryptos. While these scammers make money, their audience is left with worthless cryptos.

Understanding the Role of Cryptocurrency Investigators

The cryptocurrency investigations team plays an important role in the crypto world. Acting like detectives, they track down the stolen crypto to the last penny. At Capx Recovery, our team of dedicated and diligent cryptocurrency investigators is out to safeguard the financial interests of the victims who have fallen prey to online cryptocurrency scams.

The role of such crypto detectives is becoming increasingly important as the popularity and adoption rate of cryptocurrencies are becoming more mainstream. Thus, possessing a unique blend of technical knowledge, investigative skills, and cyber forensic analysis is vital in combating the ever-increasing number of these crypto scams.

Our experts in cryptocurrency fraud investigations employ both open-source intelligence methods and closed-source tools that include licensed government-grade software that helps compile vital data that is essential to constructing a comprehensive case on behalf of our clients.

As scammers involved in the scam leave behind digital footprints, it is up to our crypto recovery specialist to recognize and follow them using data that is publicly available, like social media profiles, forum posts, proprietary databases, and advanced analytical tools.

We have a vision and mission statement that encompasses empowering the victims of online scams by returning lost crypto assets, including non-fungible tokens, or NFTs, to their rightful owners by delivering unparalleled expertise and cutting-edge solutions.

Our cyber forensics will leave no stone unturned and gather all the important details, even those that victims may not consider. We assure the safety and confidentiality of the data provided by the victim throughout the recovery process and beyond. Thus, the data gathered and entrusted to us by victims of online scams is safe and secure.

As a cryptocurrency detective, our team possesses a vast amount of experience and expertise that are crucial to tracking down stolen cryptos from the victim’s wallet to the scammer’s wallet. The task is challenging since scammers frequently change their wallets.

Our experts, armed with state-of-the-art software and hardware and in-depth knowledge of the international financial system, with their technical skills and investigative mindset, are able to uncover the exact wallet where scammers have hidden their victims’ stolen crypto assets.

Once victims of an internet scam contact us and give us the authority to work on their investigation, our experts will first gather all the information, right from the onset of the scam to the point where victims realize they were scammed.

Our experts in cryptocurrency fraud investigations will create a strategy unique to each individual that maximizes the recovery process of crypto assets based on the information provided by victims. They will also engage and negotiate with third parties, such as cryptocurrency exchanges.

When every action is carefully thought out, our experts execute the plan of action. While recovering, our experts honor international financial boundaries and work within the legal framework. After negotiating with the third parties involved, our crypto recovery specialist will initiate and maximize the recovery process.

Our experts will also create a strong case that will allow these victims to hold scammers accountable in the courts of law.

6 Tips to Identify and Avoid Crypto Scams

One of the common questions that many victims of an online scam face is ”What to do when you’re scammed?” You can easily avoid these dilemmas if you keep your eyes open, especially when a business opportunity comes along.

• Offering a once-in-a-lifetime opportunity or providing unrealistic returns on investments.
• The business opportunity offers low risk with unlimited profit potential.
• You are required to submit sensitive details to the business that you would generally avoid sharing with your close ones.
• The business model revolves around how much money you will make instead of how the funds will be allocated to the business.
• You are encouraged to reinvest in the business and discouraged from withdrawing from your account.
• There are irregularities while receiving the promised amount of money.

Crypto Scam Investigation Process

With the rampant online crypto scams in our society, there is a need to protect the financial interests of crypto users who only wish to create wealth and increase it by investing and trading in the crypto market. We at Capx Recovery have taken this responsibility on our shoulders. Although there are huge challenges ahead, it is not impossible for our dedicated and diligent crypto asset recovery specialists.

Our cryptocurrency fraud investigations team will gather all the information from victims caught in an online crypto scam. They will probe the minute details that victims may not consider to be evidence. After gathering all the information, they will provide a realistic crypto asset recovery plan.

Once these victims give us the authority to pursue their case, our crypto asset recovery specialist will meticulously try to track down the stolen crypto assets. For this, they will use the details provided by the victim of the scam.

Our experts will go through social media platforms and other public platforms to hunt for scammers. Once these scammers have been located, the next phase of the investigation begins. Since these con artists have the habit of moving stolen cryptos from one wallet to another, our team will hunt for the stolen cryptos.

Once all the cryptos are located, our experts then begin the negotiation phase, where they will interact with the crypto exchange and tell them about the scam. When the talks are over, these exchanges give the go-ahead to freeze the scammers’ accounts, help our experts recover the stolen crypto assets from them, and hand them over to their rightful owners.

Conclusion

As we are slowly but surely moving from a paperless environment to a digital currency one, we must take extra care to safeguard our financial interests. Relying on the government to recover assets is indeed a good idea; however, their resources are thinly stretched, and the number of scammers online is large. Thus, it becomes necessary for us as individuals to depend on crypto asset recovery specialists like Capx Recovery.

One of the most important advantages is that we have a team of cryptocurrency fraud investigations that can work on the recovery of stolen crypto assets at an individual level. Thus, it becomes easier to pursue crypto scams at an individual level, and the results are fast.

Frequently Asked Questions About Crypto Scam Investigations