Tracing Cryptocurrency Scammers After Their Exit

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2019 has surprisingly been a prosperous year for scammers and cybercriminals. One of the softest targets for these fraudsters has been cryptocurrencies, as these give them a clean gateway to escape after committing their fraud, easily avoiding the long arms of law enforcement and bank intervention.

A report published by CipherTrace stated that more than $4.25 billion have been stolen from crypto exchanges, users and investors in 2019 so far.

These statistics undoubtedly arise fear of cryptocurrency scams among those who are looking to step foot in the industry. The truth of the matter is that the cryptocurrency industry in and of itself is not a scam. Unfortunately, these inevitable incidents so badly victimize crypto investors that they are gradually making people lose faith in the evolving ‘Internet of value’. This is a harsh reality that exists due to professional conmen, who tend to take advantage of the anonymous nature of the emerging blockchain technology.

Miguel Cuneta, a featured writer on Medium who’s been building bitcoin and blockchain businesses in the Philippines since 2014, states, “While we think that Bitcoin is here to stay, know that all forms of speculation (stock trading and forex trading for example) carry a lot of risks.”

There are many different ways the fraudsters use to trick the new crypto investors, such as phishing, fraudulent ICOs, malware and Ponzi schemes. But today, we are going to talk about a new form of forgery that’s lurking around in the decentralized crypto world. It is a specific kind of crypto scam that comes with full-fledged planning to vanish away after stealing money from thousands of people.

Many people may have written about cryptocurrency exit scams, but nobody has been able to come up with a solution. The critical thing to learn to be able to stop these scams from recurring is not just identifying red flags at the initial phases, but to know how to trace the activities and whereabouts of the scammers after their ‘exit’. This is the only way the victims can see a chance to get their money back; or at the least, prevent more scammers from infecting the society, thinking they can get away with it.


How does the scam start?

If you’re a cryptocurrency trader, or have been reading about it for a while, you must have heard of fake coins and fraudulent ICOs, whereby a group of people launches a new (fake) coin, and claims to be collecting the funds to start a new project or business with it. In reality, they take the money, let the coin price plummet, shut down any office they have, and run away with all the cash. This is the kind of cryptocurrency exit scam that most people talk about. @Blake Miner calls this an ‘ICO gold rush’.

Another kind of exit scam – the one I actually want to talk about today, is when a person or group of people is running a fake cryptocurrency exchange. They may be either calling it a foreign exchange and trading cryptocurrencies secretly through it, or simply announce it as a crypto exchange and act like brokers or ‘businessmen’ (with no real business acumen). These people walk and talk like reputable professionals, and use their outlet to merely separate their customers from any hard-earned money that they bring to them to ‘exchange’. They don’t have a proper verification system in place.

According to Febin John James, a professional writer and blockchain enthusiast, “If the exchange doesn’t have a verification process, it could be a scam.”

These scammers keep looking for a chance to be able to collect enough cash on any given day, so that they shut down the whole thing overnight and deposit the money into their personal bank accounts.


What’s the scammer’s escape strategy?

These scammers are very particular about keeping their identity hidden from the Internet throughout the pre-exit period. They barely promote their ‘foreign exchange’ outlet on any websites or posts. Reason is they plan to re-launch themselves after the theft, and when they do that, they obviously wouldn’t want anyone to be able to trace their past criminal activity. Hence in the first phase of the fraud, they stay low-key.

So where do they go after the ‘exit’? Do they leave the country? Nope. Do they go in hibernation mode for few years? Nope. Do they straight away multiply the money they just stole? Again, nope!

Let me explain one by one why the answer to all these scenarios is no.

Fraudsters are cowards at heart. They don’t have the guts to relocate to another country and start a new life in a completely new environment. Hence, they will stay in their country of origin and just find a new community within the same culture to hide in, by moving to a different town or state.

They wouldn’t hibernate either. Someone who has just made a lot of money without any expertise other than fraud would rather want to flaunt their wealth by buying expensive things and changing their lifestyle.

They would probably like to start a new venture as well. But don’t forget – fraudsters are neither properly educated nor have any skill or expertise to successfully run a business. At the same time, due to lack of any proper or traceable working experience, they wouldn’t be willing to look for a job either. Thus they would end up registering a new company and hiring employees. This kind of people prefer hiring a bunch of fresh graduates to take advantage of their lack of exposure of the corporate world. They fear hiring clever people who they think can possibly figure out the scam.  They will invest all the stolen money, but will not be able to multiply it or make any kind of profit out of it anytime soon.


How can you trace the scammer?

The only industry the scammers have exposure of is the cryptocurrency industry. After being successful in their theft, they would become even more enthusiastic about cryptocurrencies. They would want to do something that’s somehow still related to cryptocurrency. They may not make an attempt to commit the exact same fraud again, but would stick around with cryptocurrencies, trying to do other things with it in the name of their newly registered company.

Scammers would change their own contact details, but would keep the contact details of all their victims with them. When they start a new ‘business’, they would start approaching the same people they cheated with a new name and from new channels. They would handover their precious email list or phone numbers database to a new in-house marketing employee whom they hire, and ask him/her to initiate contact with the ‘company’s customer base’.

Lookout for any spam emails coming to you, asking you to subscribe to a cryptocurrency publication site; or a marketing call asking you to partner with a crypto-related firm you have heard nothing about. These spam emails are not a coincidence. They come to you from somebody who has been successful in fully or partially scamming you in the past, and has kept your email address to trick you with a new story again.

If you are good at investigating about new companies, you may be able to get the scammer’s new contact details. Dig out for the scam company’s registration documents to get the full names and new addresses of its shareholders and directors. The scammer may not put his name in the company’s top management, but his name might appear as a shareholder, a ‘silent partner’ or even a ‘business advisor’ on the company’s website.


Such fraudsters may be able to get away from the government by taking advantage of the decentralized system of blockchain, but they won’t be able to get away for long from a person who’s personally seeking revenge. Catching such thieves is critical to make your contribution to the development and evolution of cryptocurrency as well as blockchain technology.

Don’t let people scam you, steal your money and run away with it. Help the society in making the crypto-world a fraud-free place!

Sana Uqaili

Sana Uqaili is a professional content developer, a strategic marketing adviser and a freelance copywriter. Her ghostwriting contributions have enhanced the Google rankings of various news portals and publication sites. She is currently employed as the team lead for digital marketing in an engineering consultancy firm. In her free time at home, she writes for Opinined.

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