FBI Issues Public Warning Over Bogus Crypto Apps

Key Insights:

• Cybercriminals are now using apps with the same logos as legitimate crypto companies to defraud investors.
• Fraudulent crypto mobile apps have swindled U.S. investors out of an estimated $42.7 million. 
• The FBI launched a Virtual Assets Unit to crack down on cyberattacks. 

The United States Federal Bureau of Investigation (FBI) has warned both financial institutions and investors to protect themselves against fraudulent schemes that have swindled U.S. investors out of an estimated $42.7 million so far.

The public warning is specifically related to fake cryptocurrency applications that use the same logos and identifying information as legitimate crypto companies.

Crackdown on Cybercrime

According to the FBI, 244 people have already fallen victim to fraudulent cryptocurrency investment applications.

In order to convince users to download mobile apps and deposit cryptocurrency into wallets owned by the perpetrators, some apps use the same logo as an actual U.S. financial institution.

When victims attempt to withdraw funds from the app, they are asked to pay taxes on their withdrawals — a ruse used to extract more money from victims. Notably, those who made the payments were still unable to withdraw their funds.

In one operation, cybercriminals operating under the fraudulent company name YiBit, defrauded at least four victims of around $5.5 million between October 2021 and May 2022.

Another case in November last year involving criminals operating under the alias Supay led to two victims depositing cryptocurrency into their wallets on the app, which were then frozen unless more funds were deposited.

FBI’s Crypto Unit

Earlier this year, the FBI announced the creation of a new crypto unit to crack down on cyberattacks. The Virtual Assets Unit (VAU) boasts experts from the crypto industry and cross-divisional resources to help integrate intelligence and operations.

The VAU, which ultimately aims to track the movement of illicit funds and disrupt illegal activity, joins the agency’s other cryptocurrency efforts, including a National Cryptocurrency Enforcement Team (NCET) within the Criminal Division.

The FBI’s new public warning comes amidst a rise in cryptocurrency-related online crimes, likely due to the increasing popularity and adoption of digital currencies such as Bitcoin (BTC) and Ethereum (ETH).

According to a study by Chainalysis, victims lost $14 billion through crypto-related crimes in 2021, up from $7.8 billion in 2020. A similar report from the United States Federal Trade Commission (FTC) found that nearly half of all crypto-related scams originate from social media platforms.

In May 2021, U.S. President Joe Biden signed an executive order which is intended to curb cyber crypto crime and includes a shift to multi-factor authentication, data encryption, a zero-trust security model, and improvements in endpoint protection.

The FBI has cautioned investors to be wary of unsolicited requests related to investment apps and to take steps to verify if an app is legitimate before downloading it.