Seduced by crypto and taken for millions

6/4/2022 9:01:00 PM

Crypto fraudsters are stealing millions from Silicon Valley techies who never thought they could fall for such scams, writes Examiner reporter Jeff Elder.

Crypto, Tech

Even in the ruthless realm of online fraud, pig-slaughtering can be so devastating that it startles veteran investigators and victim advocates. “What makes it so believable is the technological sophistication,”

Crypto fraudsters are stealing millions from Silicon Valley techies who never thought they could fall for such scams, writes Examiner reporter Jeff Elder.

“I lost more than just money. I lost my self-confidence,” says Cy, who committed himself to a Bay Area psychiatric ward with suicidal ideation. “I have ruined my family’s lives.”Cy was a victim of pig-slaughtering, a type of online crypto fraud in which the victim is “fattened up” over months by a criminal who builds an online relationship, then guides the prey into crypto trading and seizes their money. The crime is on the rise in Silicon Valley, federal law enforcement says.

"The FBI San Francisco Division has seen a rising trend in which romance scammers are persuading individuals to send money to invest or trade cryptocurrency,” an FBI spokesperson told The Examiner. The FBI estimates 24,000 Americans lost more than $1 billion to romance fraud in 2021. Investigators consider it romance fraud — even though the fraudster and victim rarely meet — because criminals often use continuous affectionate texts called love-bombing to disarm victims. In Cy's case, the online relationship was not romantic.

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After taking $1.crypto-romance scams and pig slaughtering in April, noting that its Internet Crime Complaint Center received more than 4,300 complaints in 2021, resulting in more than $429 million in losses.ETH ) in their crypto account and that the price of bitcoin was $55,000 per coin and ether was $3,500 per coin at the time of purchase.Table of Contents.

2 million from Cy in a crypto fraud scam, the criminal ended their two-month online correspondence with the words, “Now you have to go kill yourself.” Cy, a Bay Area real estate analyst, almost did. R’s case, in particular, is notable as she is an IT manager from the Bay Area who lost around $1. “I lost more than just money.14 ETH. I lost my self-confidence,” says Cy, who committed himself to a Bay Area psychiatric ward with suicidal ideation. Despite being well versed in computer tech, R stated that the scammer’s professional profile managed to win her trust by being listed as an alumnus of the same top tech university that she graduated from in China. “I have ruined my family’s lives.

” Cy was a victim of pig-slaughtering, a type of online crypto fraud in which the victim is “fattened up” over months by a criminal who builds an online relationship, then guides the prey into crypto trading and seizes their money. I’ve written software.14 ETH. The crime is on the rise in Silicon Valley, federal law enforcement says. "The FBI San Francisco Division has seen a rising trend in which romance scammers are persuading individuals to send money to invest or trade cryptocurrency,” an FBI spokesperson told The Examiner.2 million over two months and ended up in psychiatric care after suffering suicidal thoughts. The FBI estimates 24,000 Americans lost more than $1 billion to romance fraud in 2021. The -$23,384 loss can now be used to offset any taxable gains in other parts of the investor’s portfolio where he has profited. Investigators consider it romance fraud — even though the fraudster and victim rarely meet — because criminals often use continuous affectionate texts called love-bombing to disarm victims. I lost my self-confidence,” said Cy.

In Cy's case, the online relationship was not romantic. An investigator for the San Francisco cybersecurity company Sift found that one in 20 people who approached her on dating apps was working the scam.” The Global Anti-Scam Organization believes Silicon Valley workers are increasingly falling victim to these scams due to overconfidence in tech-savviness, loneliness due to the pandemic and an interest in gaining crypto exposure. If the investor does not wait 30 days, the transaction is considered a “wash sale” and the loss is not able to be used to offset a gain. Even in the ruthless realm of online fraud, pig-slaughtering can be so devastating that it startles veteran investigators and victim advocates. “It's psychologically dark,” says Grace Yuen of the Global Anti-Scam Organization, a Singapore nonprofit that says it has helped more than 1,400 victims, including many from the Bay Area. “They gain your trust. So in the case above, if the investor still wishes to hold bitcoin and ether, he simply purchases the same amount of each immediately after selling the position.

They chat with you for hours on end.” Then the criminals turn on their victims. Yuen says of her group, “Sometimes it feels like a suicide hotline. Being able to preserve a position while realizing the loss is a great way to boost long-term returns and increase tax efficiency of a financial plan.” Here’s how pig-slaughtering works: A fraudster approaches a victim on social media, a dating app or messaging platform posing as a new friend, often an attractive young person. The fraudster moves the online conversation to an encrypted messaging app like WhatsApp, where it cannot be traced.

Over weeks or months, the criminal uses what Yuen calls “very skillful tactics to groom and to gain an individual's trust.14 ETH position (minus market movement and transaction costs).” Cryptocurrency is brought up as a conversation topic, then as a potential investment, and finally with specific instruction in how to invest. Real websites and apps, like crypto.com and MetaTrader 5, are used to induce the victim to invest their money. While the rules are clear, it’s incredibly important to track these transactions. Then the fraudsters switch the real crypto platforms with replicas and the victims lose their money.

The criminals reassure the victims that their lost money is easily regained, and a second theft occurs. The criminals then disappear, leaving the victims in despair. Understanding the tax rules governing crypto positions can provide a unique opportunity during a bear market and can help ease taxable burdens of investors willing to do the work.  “I really do not think that I can ever forgive myself,” says Cy, who requested to use a pseudonym to protect his career and family. The crime appears to be happening more in Silicon Valley than elsewhere, says Yuen, despite the area’s tech savviness. Victims are engaging more online because they have been lonely in the pandemic.m.

They have been curious about cryptocurrency, wondering how they could experiment with it. And, especially in Silicon Valley, they are perhaps overly confident that they could never fall for such a scam. But the patience and detail of the scam is just too convincing. “What makes it so believable is the technological sophistication,” says Jane Lee, the investigator at Sift, who looked into the scams. “These relationships are built over time.

It actually carries on and on, and it's quite elaborate.” Lee says she has connected with many “Bay Area-based folks that have either been targeted by the scammers or know somebody that has been targeted.” R, another Bay Area victim of the scam, is an IT manager. “I never thought it could happen to me because I use tech. I’ve written software.

” But when a man approached her on LinkedIn she noted he was an alum of a top tech university in China she graduated from. Over a months-long process of WhatsApp chats, she was also guided to invest in cryptocurrency. Like Cy, she lost around $1.3 million. “I feel so deceived,” says R, who also asked for anonymity.

R and Cy have both found some solace in an online peer group at Global Anti-Scam Organization, which requires them to verify their experience by providing their report to the FBI. Cy wants to know why MetaTrader 5 is not facing more scrutiny because users of the app have complained of fraudsters abusing the platform, and that has been detailed by GASO, the victims advocate organization. The company behind the app, MetaQuotes, is based in Cyprus and lists only mailing addresses as a way of contacting the company on its website. The Examiner found an email address for an executive at the company, but has not received a response to several requests for comment. But one of the biggest tech companies in the world has also failed to respond to requests for comment on its role in pig-slaughtering.

Apple approved the crypto trading app MetaTrader 5 for its App Store for ages 4 and up. It shows 15,000 downloads and its predecessor MetaTrader 4 shows 59,000. Dozens of reviews on the App Store warn of scams like the ones that robbed Cy. “They are allowing THIEVES TO TAKE YOUR MONEY,” one review says. “MT5 needs to look at and do something about the illicit brokers that use the app to create fake real time charts and scam innocents of millions of dollars,” reads another.

“This application is full of scammers. A lot of lives have been ruined by this application,” says another. Another platform misused by scammers, Crypto.com, responded that the company"is committed to security, and we take a proactive approach to managing and protecting against external threats, including scam and phishing campaigns.” The Singapore company, which hired Matt Damon to evangelize crypto to the masses, also encouraged users “to verify the account where they are sending funds before completing transfers.

”  Coinbase, a San Francisco company and the biggest U.S. cryptocurrency exchange, recently posted a blog post on this topic, and says it is “working with industry partners to take down these sites and developing ways to warn users when visiting known scam sites in order to help limit the damage caused by this type of scam.” Cy said he tells new victims not to feel dumb. “We didn't get duped because we're stupid,” he says.

“We got duped because the syndicate was very sophisticated.” This is what Cy tells newbies to the support group of victims. “Every week there's at least two or three new members.” jelder@sfexaminer.com .