Feds seize $66.4M in cryptocurrency linked to LA investment scams
PARIS, FRANCE - FEBRUARY 16: In this photo illustration, a visual representation of digital cryptocurrencies, Bitcoin, Ripple, Ethernum, Dash, Monero and Litecoin is displayed on February 16, 2018 in Paris, France. Digital cryptocurrencies have seen
LOS ANGELES - Federal prosecutors in Los Angeles have seized virtual currency worth $66.4 million linked to cryptocurrency investment scams commonly called "pig butchering," the U.S. Department of Justice announced Monday.
According to court documents, the virtual currency accounts in Los Angeles and elsewhere were used to launder proceeds of various cryptocurrency confidence scams. In these schemes, fraudsters cultivated long-term, online relationships with victims, eventually enticing them to make investments in fraudulent cryptocurrency trading platforms. In reality, the funds sent by victims for the investments were instead funneled to cryptocurrency addresses and accounts controlled by scammers and their associates, according to the DOJ.
A U.S. magistrate judge in Los Angeles authorized the seizure of an account containing $66.4 million in various cryptocurrencies after finding probable cause that the funds were derived from wire fraud schemes, according to the DOJ.
"The victims in Pig Butchering schemes are referred to as `pigs' by the scammers because the scammers will use elaborate storylines to `fatten up' victims into believing they are in a romantic or otherwise close personal relationship," according to an affidavit in support of the Los Angeles seizure warrant. "Once the victim places enough trust in the scammer, the scammer brings the victim into a cryptocurrency investment scheme."
The scammer attempts to create the appearance of legitimacy by fabricating websites or mobile apps to display a bogus investment portfolio with large returns, the affidavit states. In relation to the Los Angeles-based account seizure, the FBI has identified at least 10 victims who were unable to withdraw funds they had invested, with the seized account containing some funds from all 10 victims.
Authorities executed the Los Angeles seizure warrant in December and received the last transfer of cryptocurrency on March 21.
"Using the methods of traditional con artists, high-tech fraudsters have taken advantage of the publicity and hype surrounding cryptocurrency to encourage an untold number of Americans to invest in get-rich-quick schemes," U.S. Attorney Martin Estrada of the Central District of California said in a statement.
The affidavit in the Los Angeles seizure warrant discussed a series of cryptocurrency investment scams, one of which targeted a woman who was contacted on LinkedIn by a man who used the name "Fei Kuang."
After learning the victim already had a small cryptocurrency account, Fei Kuang offered to help the victim, eventually convincing her to invest more money and to move her funds to another, presumably fraudulent, trading exchange, according to the document. When she tried to withdraw her funds, she was told she had to pay 20% in "taxes." When the trading platform continued to demand more money, the woman realized she was the victim of a scam which cost her about $2.5 million, according to the DOJ.
In 2022, investment fraud nationally caused the highest losses of any scam reported by the public to the FBI's Internet Crimes Complaint Center, totaling $3.31 billion, prosecutors said.
Frauds involving cryptocurrency, including pig butchering, represented most of these scams, increasing 183% from 2021 to $2.57 billion in reported losses last year, authorities said.