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The mobile application showed a profit of $2.8 million on what appeared to be a hot day of trading on the Singapore exchange. But whenever the trader tried to withdraw funds back home in the United States, she faced customer service representatives asking for mysteriously high tax payments or fees, according to court documents.
U.S. officials say it’s a new and sophisticated scam draining millions of dollars from people who drop their guard online. Far from earning $2.8 million, the trader invested $9.6 million into the platform this year before it all vanished, according to court documents.
In a court filing in November, the Secret Service said five U.S. victims reported that they were enticed to invest large sums in cryptocurrency this year by scammers who created seven identical domains spoofing the website of the Singapore International Monetary Exchange. The scammers also created a smartphone app mimicking what traders use on legitimate platforms, officials said.
According to a warrant filed in federal court in the Eastern District of Virginia as part of the websites’ seizure last month, one victim in Richmond lost $289,000. Another, in Los Angeles, was drained of more than $200,000. The trader in Redmond, Wash., who thought she netted $2.8 million in one day in July said her account showed a total profit of about $7 million.
But the “trading profit” displayed on her app was an illusion, according to U.S. officials.
“After numerous attempts to withdraw their investments, they were unable to recover any portion of their cryptocurrency investment,” a Secret Service agent stated in the court filing in November.
Investigators call it a “pig-butchering” scheme. Scammers find targets on dating apps, social media or via text messages sent to a “wrong number.” They strike up relationships with the targets and slowly gain their trust, eventually floating the possibility of a cryptocurrency investment. Once the money is sent to a fake investment app, the scammer disappears with the funds.
Jason Kane, deputy assistant director of the U.S. Secret Service Office of Investigations, called it “the next generation of the long con.”
“The American public must be aware of the dedication these criminals have to defraud people out of their hard-earned money,” Kane said in a statement. “Fraudsters may identify their victims and coerce them into investments, producing so-called returns on the 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 solicitation of funds from an unknown source.”
The FBI said that 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, which resulted in more than $429 million in losses.
“Scammers are using translation programs to communicate seamlessly with their victims,” the FBI said in a news release. “Victims have very similar stories: Meeting someone on a dating app, the scammer gains the confidence and trust of the victim, and then claims to have knowledge of cryptocurrency investment or trading opportunities that will result in substantial profits. The victim is then directed to transfer large amounts of cryptocurrency from the exchange account to cryptocurrency wallets controlled by fraudsters, ultimately losing it all.”
The trader in Washington state said she communicated with a scammer via LINE, a Japanese chat application, and WeChat, a Chinese app. The warrant application does not describe how the two became acquainted.
Her first investment was for $400, authorities said, but days later she poured another $100,000 into the platform, and wound up losing $9.6 million total. She said “customer service representatives” would make requests for “taxes” or “fees” whenever she tried to withdraw funds from her account, according to the warrant application.
In May, a representative on the fake Singapore exchange told the trader that “according to Financial Income Tax Act, if the total profit of the day exceeds 100% of the principal amount of the transaction, you need to pay 30.6% of the profit amount of personal income tax,” U.S. officials said. That meant paying another $570,384 in taxes, according to court records.
“Please pay as soon as possible, after payment we will deduct the tax for you, thank you!” the representative said.
After the trader made the purported income tax payments and tried to withdraw funds, she was told the next month that she had “received 33 abnormal” bitcoin and “your account now belongs to the abnormal state … you need to pay 33 BTC as a security deposit, to ensure that you are not involved in any illegal behavior,” the warrant application says.
That’s when the trader “determined it was a scam and stopped making investments,” according to court records.
U.S. officials said the investigation into the spoofed Singapore exchange is ongoing. Federal prosecutors have not identified suspects by name. Officials said people who believe they may be victims of a cryptocurrency scam should contact CryptoFraud@SecretService.gov or visit IC3.gov to file a report.
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