Elon Musk is a billionaire who is often regarded as being the most influential person in our world today, with a proven track record of affecting digital asset markets. 1
Musk allowed Tesla customers to make their purchases using Bitcoin in 2021, and by this propelling the cryptocurrency market to new highs.2 During the same year, market prices of Bitcoin, Ethereum and Dogecoin increased by 10%, 7.3% and 11% respectively, after Musk had signaled his support for digital assets the week before.3
Because Musk is the most well-known cryptocurrency advocate, “bad actors frequently take advantage of Musk’s popularity and influence to defraud unsuspecting consumers,” according to William Callahan, Director of Government and Strategic Affairs at Blockchain Intelligence Group, and former U.S. Department of Justice Special Agent. Scammers go to great lengths to make their schemes look legitimate, impersonating him, hacking his Twitter account, and promoting scams with Deep Fake Videos of his interviews.4
There are many categories of cryptocurrency scams, the most common are giveaway and investment scams.
Elon Musk Giveaway Scams
Giveaway scams are attempts to trick victims into thinking that a legitimate cryptocurrency exchange or a celebrity is funding a cryptocurrency giveaway.
Scammers began impersonating Musk in 2018 to trick investors into thinking he was giving away bitcoin.5 A message for a bitcoin giveaway scam was made and disseminated by several verified Twitter accounts impersonating Musk.6
Example of a tweet from a verified account (@TylerFlorence) impersonating Elon Musk on Twitter
Source: Twitter
Giveaway Doubler Scams
Doubler-scams guarantee to double any cryptocurrency deposit made through the scam’s site. Several YouTube accounts were utilized in June 2020 to entice owners of cryptocurrencies into fake Tesla and Musk giveaways that were later discovered to be doubler scams.
For example, scammers broadcasted a live video from the Live News YouTube channel, showing a Bitcoin SpaceX speech by Musk labeled “Elon Musk – SpaceX Dragon & NASA Astronauts return to earth & Dragon Crew Demo-2 Keynote,” with a thumbnail announcing a giveaway.7
Live stream video by Live News YouTube channel
Source: YouTube
The scam promised that for any amount of Bitcoin sent, a giveaway of double the amount would be made. What made it even more convincing was that there seemed to be a live broadcast of recent transactions, with customers depositing money and receiving twice as much.8 An investigation of the scammer’s wallet later revealed that none of the money had been returned and that the broadcast of transactions was entirely fabricated.9
Homepage of the scam’s landing page www.SpaceXBitcoin.org
Source: YouTube
Elon Musk Investment Scams
While new currencies are continually added to the blockchain, and new trading platforms are being developed, smart contracts with attractive returns may be used to market a fraud. A corporation may claim to have an opportunity to invest with guaranteed 1000% profits. The victims are then lured into an investment scam, where they buy the currency intending to sell it when prices increase.
This year, scammers tried marketing a trading platform called BitVex using Deep Fake Videos of Musk and other prominent Bitcoin proponents to steal assets.10 These videos are real interviews that have been altered with Deep Fake Technology to use the subject’s voice in a script written by the criminals.11
A YouTube user later reposted the video after it was removed.
This fake BitVex trading website pretends to be managed by Musk, who presumably designed it to allow anybody to earn up to 30% returns on their cryptocurrency investments. To make the site appear real, the dashboard would list recent withdrawals of various cryptocurrencies.
Screenshot taken from www.bitvex.org claiming Musk is one of the founders
Source: Wayback Machine
Data on Elon Musk-Related Scams
According to statistics released by the Federal Trade Commission in May 2021, cryptocurrency criminals impersonating Musk generated about $2 million in the six months prior to the publication of their investigation.12 Blockchain Intelligence Group conducted an analysis and found that from 2018 to May 2022, an estimated $5.4 million worth of cryptocurrency was lost to scams perpetrated in the name of Elon Musk.
This graph shows the number of Ethereum (ETH) and Bitcoin (BTC) addresses that were used in scams perpetrated in the name of Musk from 2018 to May 2022. Note that these numbers are not indicative of the number of Musk giveaway scams that took place in this period as multiple addresses can be used in a single giveaway scam.
This graph shows the potential number of victims of scams perpetrated in the name of Musk from 2018 to May 2022. Over this period, a total of 2,703 people possibly fell victim to such scams. The data shows that 2021 saw an exponential rise in such scams. This can be attributed to the cryptocurrency boom of 2021 and it coincides with the announcement of Tesla’s $1.5 Billion dollar Bitcoin investment in February 2021.
This graph shows the amount of funds in U.S. Dollars (USD) that were stolen in Bitcoin and Ethereum from 2018 to May 2022 in scams perpetrated in the name of Musk. Over this period, about $5.4 million were stolen in BTC and ETH (including ERC-20 tokens like Shiba Inu) in such scams.
Case Study
On June 19th, 2020, a video was live-streamed from an account labeled as verified by YouTube, and appeared to belong to a prominent news program. The video included the link to a scam website, promising to double the returns of cryptocurrency investments made through the link as part of a Musk giveaway.
A vanity address with Musk’s name (1MuskPsV7BnuvMuHGWmmXUyXKjxp3vLZX6) was used in the video and the accompanying websites to scam 49 victims out of over 14.49 BTC, or roughly $136.7k.
Source: Google Support
Screenshot showing an account labeled as verified by YouTube, streaming a live feed with a video of Elon Musk to claim he is personally promoting this giveaway
Screenshot from the scam’s landing page: www.btc-event.org
Figure 1. An identified Dark Market address received 0.898 BTC from the scammer’s address
Figure 2. A total of 4.12 BTC remaining unspent
Blockchain Intelligence Group’s cutting edge software used by global law enforcement agencies called Qualitative Law Enforcement Unified Edge (Q.L.U.E.) identified that the scam’s advertised payment address received a total of 14.49 BTC. These funds were then split across 4 addresses, with 0.93 BTC eventually going to a known darknet market address (fig.1 and fig. 3) and 4.12 BTC staying unspent in an address (fig. 2). About 9 BTC were distributed to exchanges, unknown wallets and services using a technique known as “peel chain” (fig. 3).
Peel chain is a technique in which small amounts of cryptocurrency are “peeled off” from the original large amount in a series of transactions. These tiny amounts are then often transferred to Virtual Asset Service Providers (VASPs) to be liquidated or swapped for another digital asset.
The remainder from these incremental transactions get subsequently sent to a new address. A peel chain could be formed by repeating this technique hundreds or thousands of times. This method is known to be mostly used on the Bitcoin blockchain.
Figure 3. The “peel chain” money-laundering process in action
Callahan who oversaw cryptocurrency financial investigations as the Special Agent in Charge for the Drug Enforcement Administration in the U.S. midwest noted that “tracking funds laundered through such techniques is difficult when using open source tools such as block explorers, agents and analysts could spend days and weeks manually putting this information into spreadsheets before being able to analyze the flow of funds”. Fortunately, tools such as Q.L.U.E. enable investigators to visually spread out transactions on a diagram, within a matter of minutes, making it easier to track the flow of funds on the blockchain.
“Q.L.U.E. not only saves investigators time, but also allows supervisors to better manage investigative resources,” according to Callahan. “Transnational criminal organizations, ransomware gangs, and money launderers have learned how to move illicit funds quickly, be it fiat currency or cryptocurrency, the use of Q.L.U.E allows law enforcement to quickly identify digital assets involved in crime and seize them, keeping pace with the bad guys.”
Figure 4. A large portion of the stolen funds eventually got laundered through VASPs
In summary, on June 19th, 2020, funds sent from victims to the scammer were split and distributed to multiple addresses, some of which were left unspent or sent to a dark market address, with a large portion of the funds eventually going to VASPs after several hops (fig. 4).
How to Recognize and Protect Yourself from Celebrity-Backed Investment Scams
Watch out for the following:
Claims of a safe investment: trading cryptocurrencies involves many risks, including unpredictable market price fluctuations or flash drops, market manipulation, cybersecurity threats, and the possibility of losing your entire investment. Any cryptocurrency offer that guarantees you will make money is in all likelihood a scam.
Promises of free money: any service or individual offering to double the cryptocurrency you send them is a scam. Bitcoin doublers do not exist. Even if a celebrity announces a giveaway, it is highly unlikely that they would ask you to send them any funds.
Projects with anonymous founders: If you see a celebrity promoting an obscure project, do your due diligence and find out the team behind the project and their background. If there is no mention of the team behind the project or a member of the team has a questionable track record, the project is most likely a scam and you should avoid investing in the project regardless of who promotes it.
Reporting a Cryptocurrency Scam
If you are a victim of a celebrity or other cryptocurrency scam, you should act immediately and report to the cryptocurrency exchange company you used to send the money, and report to your bank if you:
- Used your debit or credit card to make a payment
- Paid with a bank transfer
- Revealed personal information
The US Federal Trade Commission (FTC) published a thorough article on how to recognize and avoid cryptocurrency scams. It also includes a list of US government websites where you may report any cryptocurrency-related fraud or suspicious activities:
- the FTC at ReportFraud.ftc.gov
- the Commodity Futures Trading Commission (CFTC) at CFTC.gov/complaint
- the U.S. Securities and Exchange Commission (SEC) at sec.gov/tcr
- the Internet Crime Complaint Center (IC3) at ic3.gov/Home/FileComplaint
The article can be found here: https://consumer.ftc.gov/articles/what-know-about-cryptocurrency-and-scams
Resources:
1- https://www.businessinsider.com/scott-galloway-elon-musk-influential-leaders-impact-2021-5
2- https://www.bloomberg.com/professional/blog/crypto-boost-may-be-focus-for-elon-musk-as-he-acquires-twitter/
3- https://www.cnn.com/2021/07/26/investing/bitcoin-price-dogecoin-ethereum-intl-hnk/index.html
4- https://www.nytimes.com/2020/07/15/technology/twitter-hack-bill-gates-elon-musk.html
5- https://www.bleepingcomputer.com/news/security/fake-elon-musk-twitter-bitcoin-scam-earned-180k-in-one-day/
6- https://www.coindesk.com/markets/2018/10/11/twitter-promoted-a-fake-elon-musk-crypto-giveaway-scam/
7- https://www.businessinsider.com/youtube-channels-bitcoin-scammers-twitter-hack-2020-8?r=US&IR=T
8- https://www.bleepingcomputer.com/news/security/fake-crypto-giveaways-steal-millions-using-elon-musk-ark-invest-video/
9- https://www.bleepingcomputer.com/news/security/fake-crypto-giveaways-steal-millions-using-elon-musk-ark-invest-video/
10- https://www.bleepingcomputer.com/news/security/elon-musk-deep-fakes-promote-new-bitvex-cryptocurrency-scam/
11- https://www.bleepingcomputer.com/news/security/elon-musk-deep-fakes-promote-new-bitvex-cryptocurrency-scam/
12- https://www.ftc.gov/news-events/data-visualizations/data-spotlight/2021/05/cryptocurrency-buzz-drives-record-investment-scam-losses
Written By Our Team:
Farhan Khan, Abid Khan & Maryam M. Ahmed
