In today’s digital age, scammers are increasingly exploiting social media platforms to carry out cryptocurrency fraud schemes. There are compelling reasons for this trend. The rapid growth of cryptocurrencies has attracted the attention of both legitimate investors and fraudsters seeking to exploit unsuspecting victims, but also, social media facilitates anonymity, making it more challenging to identify those responsible for criminal activities. 

Social Media have become an ideal breeding ground for scammers due to their extensive reach and ability to target specific user groups. Fraudsters create fake accounts or hijack legitimate ones, posing as cryptocurrency experts or influencers to gain credibility and trust. 

They use various tactics to manipulate and deceive users, including sharing enticing investment opportunities, promising unrealistic returns, and offering fake giveaways or airdrops.

Here are a few recent examples of social media-engineered attacks:

Phishing

Scammers often use social media to launch phishing attacks. They send fraudulent emails or messages that appear to be from legitimate cryptocurrency companies or organizations. These messages often contain links to malicious websites that, when clicked, can steal victims’ personal information or infect their computers with malware.

According to the FBI’s Internet Crime Complaint Center (IC3), American victims reported losing over $52 million to phishing attacks in 2022. 

Scammers create fake accounts that mimic the profiles of influential figures in the cryptocurrency industry, such as renowned investors, cryptocurrency experts or even celebrities. 

They carefully select individuals with a large following and credibility to increase the chances of luring unsuspecting victims. They employ various techniques to appear legitimate, such as editing backgrounds to include fake verified check marks.

By impersonating these figures, scammers can gain trust and fake credibility, making their fraudulent activities appear more legitimate.

Some scammers impersonate the customer support teams of popular cryptocurrency exchanges or wallet providers. They reach out to users who have expressed concerns or issues on social media platforms and offer assistance. By pretending to be authentic customer support representatives, scammers can obtain users’ personal information, login credentials, or private keys, ultimately compromising their cryptocurrency wallets or accounts.

Scammers also impersonate legitimate cryptocurrency projects, celebrities or any other entity that may help them lure users into fraudulent investment schemes or fake cryptocurrency giveaways.

Fake cryptocurrency investment opportunities

Scammers also often create fake social media accounts that pose as legitimate cryptocurrency investment platforms. They then use these accounts to post misleading or fraudulent information about their investment opportunities in order to lure victims into investing their money.

The FBI warns of false job advertisements linked to labor trafficking at Southeast Asia-based scam compounds where victims are held against their will, intimidated & forced to commit international cryptocurrency investment fraud schemes. 

Scammers also often use social media to promote fake cryptocurrency giveaways. They create fake contests or sweepstakes that offer the chance to win large amounts of cryptocurrency. However, in order to participate in these giveaways, victims are often required to provide their personal information or to send money to the scammers.

Pump-and-Dump Schemes 

Another prevalent form of cryptocurrency fraud promoted on social media. Scammers create hype around a particular cryptocurrency, encouraging others to invest heavily to artificially inflate the price. Once the price reaches a peak, the scammers sell their holdings, causing the value to plummet, leaving unsuspecting investors with substantial losses.

Scammers incorporate a number of strategies to incentivize the investment in their fake projects. One such strategy is getting their projects sponsored by celebrities and influential characters. 

Kim Kardashian was paid $250,000 to promote EthereumMax on her Instagram page, a project that led to a pump in the price of EthereumMax, as people who saw Kardashian’s post bought the cryptocurrency in the hopes of making a profit. However, after the price of EthereumMax rose, the promoters sold their shares, causing the price to crash. This left many investors who bought the cryptocurrency at a high price holding the bag, meaning they lost money.

This year, in March 2023, the Securities and Exchange Board of India (SEBI) barred 31 entities, including Bollywood actor Arshad Warsi, his wife Maria Goretti, and YouTuber Manish Mishra, from the securities market for their involvement in a pump-and-dump scheme involving the micro-cap company Sadhna Broadcast.

The SEBI order found that the promoters of Sadhna Broadcast, along with Warsi, Mishra, and others, had created a number of YouTube channels to promote the company’s shares. The channels made false and misleading statements about the company’s financial performance and prospects, in order to artificially inflate the price of the shares. Once the price of the shares had risen, the promoters and others sold their shares, making a profit at the expense of unsuspecting investors.

This type of scam has been known to exist even before crypto. With the prevalence of social media and crypto in recent years, these scams turned digital and drained millions of dollars.

Law enforcement investigators play a crucial role in combating cryptocurrency fraud facilitated through social media platforms. Education and awareness campaigns targeting both potential victims and social media platforms can help reduce the effectiveness of scammers’ efforts. 

How to spot phishing?

• Analyzing the phishing email or message: poor grammar, spelling errors and unusual requests for personal information are all signs of bad business.
• Tracking the phishing link: If the phishing email or message contains a link, investigators can track it to get clues on scammers.
• Identify any existing relationships between the wallets of the scammer and illicit sources of funds such as sanctioned wallets or those flagged with previous illicit activities.

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