The FBI Warns of a New Kind of Crypto Scam

By Evan Spicer

Director of Cryptocurrency Investigations


In past eras, fraudsters posing a Spanish prisoners or Nigerian princes tricked people into sending money to strangers. People are still sending money to strangers and unscrupulous parties are becoming even more skilled at covering their tracks. The FBI is warning the public about a new variation of bank wire fraud that involves transferring money from fiat currency to cryptocurrency through an ATM and depositing it into someone else’s account. 

The pattern is ages old and follows the script of transferring money to a fake person, like the Spanish prisoner story that dates back to the French Revolution or to a Nigerian prince who promises to uncover riches for an initial sum. However, the goal is not just to transfer fiat currency but to transfer it into cryptocurrency, which is notoriously difficult to trace. 

Cryptocurrency provides freedom and convenience but it is also considered a safe haven by cybercriminals who believe that bitcoin can’t be recovered. However, financial experts have advanced and often successful methods of recovering funds on the blockchain. Even though transactions on the blockchain are anonymous, fund recovery professionals can unmask fraudulent cryptocurrency transactions and return money to clients. 

MyChargeBack experts create cyber intelligence reports and crypto reports that help investigators track down crypto scams. We also guide consumers who are trying to recover their funds from broker disputes, forex scams or other types of fraud. Talk to MyChargeBack professionals and get started on fund recovery. 

The Evolution of Money Transfer Schemes

The Spanish prisoner and Nigerian prince are classic con schemes that involve advance fees with promises of generous returns. They convince you that there is a wealthy person who, for some reason, doesn’t have access to their funds at that time but will nonetheless reward anyone who gives them money to get them out of their predicament. The result is predictable — there is no money, and the people behind the scheme seem to vanish from sight. 

Despite warnings, people are still ready to give money to strangers who send them an email, a letter or a message through social media. Even though the Nigerian prince scheme is a well-known fraud, Americans still lose approximately $700,000 a year on this fraud. 

Modern schemes work through phishing or catfishing. In the case of phishing, someone will pretend to be from a government agency, a utility company, or another official organization. They will claim that the person owes money or will lose service and demand immediate payment. It is very easy to hide and pretend to be from a company or organization by using similar formatting, graphic design and wording as in an official text. 

Catfishing follows a similar pattern to the Spanish prisoner or Nigerian prince scenarios, but through direct communication on social media, the schemers can become even more personal with their targets and give them a false sense of familiarity or confidence. 

The catfisher will have a social media account filled with photographs of an attractive person enjoying life and they may attempt to engage the victim romantically. The catfisher may claim that they have millions in an account that they do not have access to and may need a few thousand to pay a fee. They may promise love or repayment to convince the target to make a financial transfer on their behalf. 

At the other extreme, kind-hearted people may have their sympathies manipulated to give money to someone in trouble after this person befriended them on social media and told them their hard-luck story. Fake charities work this way, but the power of social media brings individuals together so one person can play on the affections or the sympathies of someone else. 

How Crypto ATM Fraud Work

Crypto ATM frauds work in a similar way to bank wire transfer schemes. The purpose of bank wire transfer schemes was to secure funds through a method that is difficult to trace and recall. It is harder to succeed with a bank wire recall than it is a credit card chargeback, so transfers were often a chosen method by schemers who couldn’t get cash directly. 

Cryptocurrencies have now taken the place of bank wires as the preferred payment methods used in these schemes because it is much harder to recover funds from the blockchain, since all users are anonymous. Money is transferred through cryptocurrency instantly, whereas a bank wire transfer involves filling out forms and, in many cases, human interaction. Cryptocurrency is considered less risky to those who run these schemes. 

One example of how the crypto ATM fraud works is rather simple. The fraudster convinces someone else to give them money by going to an ATM machine that allows users to purchase and send cryptocurrencies. The target will use money from their own account to purchase cryptocurrencies, and instead of sending it to their own crypto wallet they will input a code and send it to the other person’s wallet. 

This is an easy procedure that takes just a few minutes. However, once it is done and if the person regrets making the transfer, it is hard to get the money back without a fund recovery service. 

How to Stay Safe from Crypto ATM Schemes

The bottom line for staying safe from any scheme like crypto ATM fraud is never to send money to an individual you don’t know in real life. Even though you have been chatting every day with a someone on social media, you may not know them as well as you feel you do, especially if you are infatuated or fascinated with them. Once they ask for money, say goodbye. 

Phishing can pose a greater challenge because it may be easy to believe that the message is actually from an organization or a utility company. However, consumers should know that no government organization or responsible company will demand payment only in cryptocurrencies. Confirm with the organization’s site that they sent you this communication before paying any money. 

How to Recover Funds from Crypto Fraud

Although many people believe that it is impossible to get money back from the blockchain, that isn’t necessarily the case. MyChargeBack professionals can assist consumers uncover the identity of the person who now holds their cryptocurrency by tracing the crypto’s path from one exchange to the next along the blockchain until it is cashed out.

If you have lost money to a crypto scam or are involved in a broker dispute, it is important to seek guidance immediately. Consult with MyChargeBack experts and provide information that can help us draw a crypto report and speak to regulators and authorities. We can assist investigators and help you with fund recovery.