Crypto Scams Surge in 2023: Americans Lose Billions to Fraudulent Investments

Crypto Scam Unveils Google’s App Store Security Loophole

Maria Vaca, a Florida resident, is now suing Google in California for at least $5 million in damages, reflecting her financial losses and the emotional and psychological toll the scam took on her.

Back in 2023,Vaca believed she was successfully navigating the volatile cryptocurrency market when she invested around $4.6 million through the Yobit Pro app between February and July.

The app initially reflected a balance of about $7 million, but when Vaca attempted to withdraw her funds, she was told she needed to deposit an additional $500,000 for "taxes."

After making the deposit, her suspicions grew when the app demanded another $2 million.

Refusing to pay, Vaca received threatening WhatsApp messages from unidentified cybercriminals, warning her to deposit the money or face dire consequences.

Alarmed, she contacted law enforcement and the Consumer Financial Protection Bureau (CFPB).

However, despite her quick action, it took Google three months to remove the app from the Play Store.

She claims that Google’s failure to prevent scam apps like Yobit Pro from being available on its platform misled her and thousands of other users into a false sense of security.

Google's Response to Crypto Scams

In a related development, Google has acknowledged the spread of fraudulent cryptocurrency apps on its Play Store.

In April, the company filed a lawsuit against two developers responsible for 87 fraudulent apps, affecting 100,000 users, including at least 8,700 U.S. residents.

While Yobit Pro was not specifically mentioned in Google's lawsuit, the tactics described match those in Vaca’s case.

Scammers lure victims with promises of high returns, but when they attempt to withdraw funds, they are met with demands for additional payments under the guise of taxes or fees.

Google’s lawsuit highlighted the reputational damage caused by these scams, emphasising that the integrity of its app store depends on users' confidence in the safety of the apps offered.

The Dark Side of Crypto and Online Romance

In another fraud case, Carina, an American citizen, fell victim to a sophisticated "pig butchering" scam—a type of fraud where scammers use emotional manipulation and fake relationships to trick victims into investing large sums of money.

Carina's scammer, whom she met on the dating app Bumble, spent about six weeks gaining her trust by portraying a lavish lifestyle and claiming to be a successful cryptocurrency investor.

Over months of communication, he convinced her to deposit a total of $152,000 into a website designed to resemble the legitimate crypto exchange Kraken.

By the time Carina realised she had been scammed, her money had already been transferred to an exchange in Thailand.

Despite providing law enforcement with the details, she has not recovered her funds.

This case is part of a larger trend of "pig butchering" scams that have cost victims billions of dollars, particularly in the form of cryptocurrencies.

According to the FBI's Internet Crime Report, losses from investment scams hit a record high in 2023, with $3.96 billion of the $4.57 billion in reported stolen funds tied to fraudulent crypto investments.

These scams are often orchestrated by networks using forced labour in Southeast Asia, making it difficult for law enforcement to track and recover the stolen assets, despite efforts by blockchain firms like Chainalysis.

US SEC Cracks Down on NovaTech's $650 Million Crypto Fraud

Recently, the US Securities and Exchange Commission (SEC) has charged NovaTech and its co-founders, Cynthia and Eddy Petion, for allegedly running a $650 million crypto fraud scheme from 2019 to 2023.

NovaTech lured over 200,000 investors worldwide, including a significant number from the Haitian-American community, through a deceptive multi-level marketing (MLM) scheme.

The company promised high returns from investments in cryptocurrency and forex trading, but instead, the Petion reportedly used new investor funds to pay existing investors and promoters while syphoning millions for their personal use.

When the scheme collapsed in May 2023, most investors were left unable to withdraw their funds.

According to Security.org, 15% of crypto holders fell for such Ponzi schemes.

Ponzi scheme is the second most common scam that most crypto holders fell for.

In addition to the Petion, the SEC also charged six top promoters—Martin Zizi, Dapilinu Dunbar, James Corbett, Corrie Sampson, John Garofano, and Marsha Hadley—who were instrumental in recruiting more victims despite knowing the risks.

The SEC’s complaint, filed in the U.S. District Court for the Southern District of Florida, seeks permanent injunctive relief, disgorgement of ill-gotten gains, and civil penalties against all defendants.

In a partial settlement, Zizi agreed to pay a $100,000 civil penalty and a permanent injunction from future violations, pending court approval.

Additional monetary remedies for Zizi and the other defendants will be determined later.

This legal action is part of a broader crackdown by the SEC on fraudulent crypto schemes, following similar high-profile cases like the $257 million fraud charges against BitClout founder Nader Al-Naji.

How to Dodge the Crypto Trap

Navigating the crypto world can be lucrative, but it's also a minefield of scams.

To avoid becoming a victim of Ponzi schemes, pig butchering, and other deceptive tactics, exercise extreme caution.

Thoroughly research any investment opportunity, verify the legitimacy of platforms and individuals, and never share personal or financial information unless you're absolutely certain of the recipient's identity.

Remember, if an offer seems too good to be true, it probably is.