Are there really so many blockchain scams?
Mr. Chen, an engineer, met someone on a legitimate dating platform and they hit it off immediately. After a few weeks of chatting and building trust, the new friend revealed that they were involved in investments alongside their job and were earning stable and substantial returns.
As a novice in cryptocurrency, Mr. Chen was skeptical at first but decided to download a WEB3 wallet based on his new friend’s recommendation. With a “don’t trust strangers” mentality, he cautiously invested a small amount of a few thousand dollars. After a few days, he saw interest being credited to his account, and after testing, he found that he could transfer and withdraw cryptocurrencies from the wallet without any issues. This made Mr. Chen lower his guard a bit and gradually increase his investment.
Soon, the website launched a limited-time promotional activity, and Mr. Chen authorized his wallet to invest more funds. However, he quickly discovered that a large sum of money had disappeared from his wallet, and the promised high returns did not materialize. The customer service claimed that Mr. Chen did not meet the requirements of the activity, resulting in his assets being frozen, and he needed to invest another amount to unlock them. It was at this moment that he realized he had fallen into a scam trap and had already lost millions of New Taiwan dollars…
With the popularity of cryptocurrencies and blockchain technology, Taiwan has seen a rapid increase in fraud cases. According to recent statistics from the Criminal Investigation Bureau of Taiwan’s Ministry of the Interior, there were 37,823 fraud cases in 2023, with 11,405 cases related to cryptocurrencies. These cryptocurrency scams are not only large-scale but also becoming more sophisticated, posing significant challenges to law enforcement agencies and the general public.
However, Chen Mei-Hui, a blockchain financial crime investigator at XREX, believes that the number of fraud cases in Taiwan is likely to be more than three times the reported statistics.
Blockchain scams are targeting both newcomers and experienced investors!
Many people may think that Mr. Chen’s story is foolish, believing that they would never fall for such scams. However, these common misconceptions, such as “just be careful and you won’t be scammed,” “only newcomers get scammed,” and “it’s safe if the annual interest rate is not high,” are not accurate. Furthermore, fraud groups have different scripts and techniques for targeting newcomers and experienced investors. Even if users are cautious, they can still fall into the traps of scams.
“‘Earn 20% annual interest easily’ is not a phrase used by advanced scam operations,” says Chen Mei-Hui. “It belongs to a lower-end scam.” This is because engineers and middle-class users with more assets tend to expect stable and conservative investment projects. Those who expect to earn 20% are likely to have less money in their pockets, making it more difficult for fraud groups to exploit them for a large amount of assets.
Particularly, scams targeting the middle class and mid-level players in the cryptocurrency circle are quite difficult to prevent. While browsing the blockchain explorer, Chen Mei-Hui searches for the victims’ wallet addresses and says, “Many engineers or users initially have high levels of vigilance.”
By opening the transaction records of some victims, Chen Mei-Hui notices a surprising similarity: the scammers first give the victims a certain amount of cryptocurrency as bait while showcasing the platform’s security. They then guide the victims to download a specific wallet application and ask for a certain fee (gas fee) to complete the registration. Subsequently, they instruct the victims to link their wallets and transfer a large sum of money to an address controlled by the scammers. However, at the moment of linking the wallet, once the user signs a smart contract, they unknowingly transfer all the permissions of the stablecoin USDT in their wallet to the fraud group.
From the records on the blockchain, it can be observed that the initial amounts transferred by the victims are not large, and there are also multiple withdrawals and tests to ensure the wallet’s security. However, the fraud groups are patient and continue to deposit high returns into the wallet, gradually making the victims lower their guard and transfer large assets into the wallet.
When the victims start to sense that something is wrong, the fraud groups (customer service representatives) try to calm them down and, in the final moments, make excuses such as “add more money to unlock collateral” or “pay to expedite the process,” draining the victims’ last bit of savings.
What should you do if you realize you have been scammed?
According to police statistics, there were over 10,000 cryptocurrency-related fraud cases in Taiwan in 2023, but this is just the tip of the iceberg. Chen Mei-Hui reveals that the actual number is likely to be more than three times the reported statistics because “there are too many victims who don’t report it.”
Chen Mei-Hui explains that the anonymity of cryptocurrencies leads many people to believe that they cannot recover their losses even if they report the scams. Additionally, many victims are afraid of being stigmatized or feeling ashamed, so they are reluctant to report the crimes. This psychological barrier makes it difficult for many fraud cases to surface and increases the difficulty of law enforcement.
The 4 steps to take after being scammed
Faced with cryptocurrency scams and significant financial losses, most people may not know what to do or which agency to seek help from. Chen Mei-Hui suggests, “If you discover that you have been scammed, first organize your financial loss records and then make sure to report it.”
Victims can take the following actions:
1. Contact the 165 Fraud Prevention Helpline of the Criminal Investigation Bureau, Ministry of the Interior.
2. Prepare all relevant information, including complete financial flow data with hash value information, the scam platform’s URL, wallet addresses, and screenshots of conversations.
3. Go to the nearest police station in your place of residence to file a report.
4. Wait for the police to contact you (you can use the case number to check the progress on the Criminal Investigation Bureau’s case inquiry website).
In most cryptocurrency exchange applications, you can find a series of code that looks like gibberish in the transaction history of “withdrawals” and “outflows.” This is usually displayed as “transaction ID” or “TXID.”
Chen Mei-Hui points out that most victims often do not know “where exactly they were scammed” and may even think that their wallet was hacked, resulting in asset loss. This leads the investigation in the wrong direction or requires more time to re-record the details. Therefore, it is best to save all conversation records and transaction records, and provide a detailed description of the situation when filing a report to expedite the process.
As digitization permeates every aspect of people’s lives, the ever-changing methods of fraud make it difficult to prevent. Blockchain, the cryptocurrency world, and cryptocurrencies themselves are just a facade. The core issue lies in people’s desire for quick wealth accumulation. The next fraudulent topic could be AI. Therefore, only through education and an ever-vigilant mindset can more people escape the traps of scams.