Valentine’s Day Scammers: Catfishing for Crypto

By Michael B. Cohen
Vice President of Global Operations

Polling conducted by Pew Research Center indicates that one out of five adults aged between 25-34 years has used an online dating site. Searching for love online has become even more popular ever since the outbreak of the COVID pandemic. Masks, restaurant/bar closures and lockdowns have made online dating sites the safest place to meet new people and begin a relationship. Or so you may have thought. Especially as traffic inevitably increases in the run up to Valentine’s Day, scammers are on these sites trolling for easy prey. 

U.S. Romance Scam Statistics

While precise statistics for last year are only now being processed, we do know that in the first seven months of 2021 the FBI’s Internet Crime Complaint Center received more than 1,800 complaints regarding romance scams in which victims lost approximately $133 million. In 2020, the FBI reported that over 23,000 victims lost $605 million.

Canadian Romance Scam Statistics

The situation north of the border is remarkably similar. Last year, romance scams cost Canadians $42 million (equivalent to $33.5 million U.S.), according to the Canadian Anti-Fraud Centre. Romance scams were the second most profitable among internet crimes, after investment scams. 

UK Romance Scam Statistics

Across the pond, Britain’s National Fraud Intelligence Bureau (NFIB) found that the total amount of financial losses from romance scams in the United Kingdom between November 2020 and October 2021 reached £92 million. That figure, however, is based on 8,863 cases reported to the NFIB during that time period ― over 27% more than comparable 2020 figures. 

It’s important to note that many romance scams go unreported, usually when victims feel too embarrassed to admit their losses to the authorities. Therefore the real number of romance scam victims worldwide is likely higher than all of the above statistics.

The Role of Cryptocurrency in Romance Scams

Today, the largest chunk of funds lost to romance scams is paid in cryptocurrency. That’s not unexpected, since cyber criminals of all varieties prefer their victims to pay them in crypto because they assume that they can hide behind the blockchain.

In January 2021 Interpol issued a “Purple Notice” to its 194 member countries worldwide, warning them that scammers are taking advantage of the “surge in dating app users” due to COVID-19. “The threat involves taking advantage of people’s vulnerabilities as they look for potential matches, and luring them into a sophisticated fraud scheme,” Interpol warned. 

If you are looking for love online during this pandemic Valentine’s Day, here are a few real stories that might help you spot a dating scam in advance and avoid being catfished.

Last December a local television station broadcasted an interview with a Denver man who lost $1.6 million to a crypto romance scam. It all began when he met a woman online who also claimed to live in Denver who, it seemed, had a lot in common with him, but curiously was never able to meet him in person. That was a red flag he didn’t see. 

Soon their frequent conversations started to focus on bitcoin. She recommended to him a particular website where he could acquire it, and anxious to cash in on the rapid rise in bitcoin’s value, he signed up. After all, the site looked legitimate and its trading platform was state-of-the-art. Following the advice his new online girlfriend happily provided, he saw that the value of his presumed bitcoin was growing fast, so he deposited all the funds in his existing retirement account. Within a month the bitcoin was valued at $8 million, and he decided to quit while he was ahead. But when he requested to cash out the bitcoin he was told that he would first have to repay a $1.5 million “loan,” which could not be deducted from his earnings. He was catfished. “I’m 52, my entire life savings, gone in a matter of a month,” he concluded. But that might not necessarily be true. 

Last November, a Canadian man admitted to the CTV Television Network that he sold his house and then transferred all of his life’s savings — about $390,000 — to what a Chinese woman he met on a dating site told him was an extremely profitable bitcoin mining website. Because she was reticent about communicating over a video link, they only texted or spoke over WhatsApp. That was a red flag he did not see. 

When he read in the news that China had banned crypto mining, however, he decided to withdraw his investment, which by that time had ostensibly grown to $900,000. But to do so he was informed that he had to pay a tax amounting to $192,000. Shocked, he spoke to his supposed girlfriend, who suggested to him that he borrow the money from his parents. Only then did he realize he was swindled and that she set him up from the beginning. He also was catfished. He went to the police, but they ultimately informed him that there is nothing they can do. But that isn’t always true. 

Last February, a British woman wrote a guest article (under a pseudonym) in The Independent that she had met a man on a dating site two years before who claimed to have been an account manager for a bitcoin trading company. That was a red flag she did not see. 

The suitor gradually convinced her to start buying crypto, or so she thought, and wound up talking her into transferring to him just over £11,000, her entire savings. When there was no more left to hand over, he told her that they were now both in trouble and she needed to cough up more cash to avoid being sent to prison with him. He even told her to refinance her home to do so. Only then did she realize she was swindled and that he set her up from the beginning. She was catfished too. She went to the police, but they never responded. “Cryptocurrency can’t be traced, so this cyber-criminal has got away with it,” she wrote. But that definitely isn’t true.

So What Exactly Can Local Police Do to Pursue Crypto Criminals?

Local police can demand that the crypto exchange hosting the wallet that received the stolen coin hand over its KYC (Know Your Customer) data about the wallet holder. KYC data includes a name, address and contact information. Once that person is identified a request can be made by your local police to the police force in the locality in which the suspect resides, either directly or through Interpol, to bring him or her in for questioning and possible arrest. If your local police cannot do that it is because they do not have access to cointracking technology. That is a tool used, for example, by central banks, taxation authorities and national security agencies to follow crypto transactions through the blockchain to the end exchange.  

There are, however, reputable providers of forensic cryptocurrency investigative services that also deploy cointracking solutions. They can use it to trace your crypto and prepare a comprehensive investigative report documenting its path that you can submit to your local police department when you file a criminal complaint. MyChargeBack, for example, employs the most sophisticated forensic cointracking tools available to trace the path cryptocurrency takes across the blockchain from one exchange to the next. Its certified cryptocurrency investigators, moreover, have established working relationships with more than 450 law enforcement agencies around the world. 

Obtaining and providing the police with a cryptocurrency trace report is the vital first step that must be undertaken to eventually return cryptocurrency to its rightful owner.