DOJ moves to seize $225 million in crypto stolen by scammers

The Justice Department is attempting to claw back more than $225.3 million in cryptocurrency stolen from Americans in confidence schemes and romance scams run out of Vietnam and the Philippines. 

A civil forfeiture complaint was filed in U.S. District Court for the District of Columbia this week, where investigators from the FBI and U.S. Secret Service said they used blockchain analysis to trace the funds back to fraud schemes perpetrated by actors in the Philippines. 

The people behind the scams used hundreds of crypto wallets to execute thousands of transactions in an effort to conceal the source of the funds. Investigators traced the money back to over 430 suspected victims in Texas, Arizona, Virginia, Iowa, California and other areas. 

Law enforcement was initially contacted by cryptocurrency exchange OKX two years ago about a large number of accounts the company believed were involved in scam operations. 

Officers interviewed about 60 victims who had lost about $19 million, but the incidents led them to dozens of other connected blockchain addresses where victims deposited millions in virtual currency under the false belief that they were using legitimate platforms. 

“These scams prey on trust, often resulting in extreme financial hardship for the victims,” said Special Agent in Charge Shawn Bradstreet of the U.S. Secret Service. “This seizure of $225.3 million in funds linked to cryptocurrency investment scams marks the largest cryptocurrency seizure in U.S. Secret Service history.”

Many of the victims referenced in the complaint share similar stories. They were typically contacted by young women or men on social media sites and offered the chance to invest their money on cryptocurrency platforms. Some people sent millions of dollars before they asked to get their money back, only to be told that they had to pay an additional fee or tax to remove the money. 

After depositing the final payment, the victims were locked out of their accounts. 

The case is evidence of U.S. law enforcement’s increasing capacity for tracing cryptocurrency and returning some portion of lost funds back to victims. 

Vietnamese in the Philippines

Prosecutors said in the complaint that many of the accounts used to launder the funds were registered to Vietnamese nationals and several of the IP addresses were traced back to the Philippines.

U.S. officials worked with OKX and blockchain company Tether to track the funds and the accounts. Nearly all of the 144 OKX accounts spotlighted by the companies were accessed via IP addresses in the Philippines and all of them were associated with email addresses using the same naming conventions. 

The accounts were opened using Vietnamese identification documents and photos that appeared to have all been taken in the same location.

“This is an indicator that the accounts are controlled by individuals working in a ‘scam compound,’ or a location operating for the sole purpose of perpetrating cryptocurrency confidence scams and laundering proceeds,” prosecutors said. 

In two of the photos submitted to verify the OKX accounts, the people pictured were wearing lanyards with the company name “ITECHNO Specialist Inc.” The company is a call center located in Manila and law enforcement agencies found several job postings seeking Mandarin-speaking applicants. The ads offered to pay for people to travel to the Philippines for the positions.  

The Justice Department said the use of Vietnamese documents for the 144 OKX accounts accessed through Philippine-based IP addresses are “consistent with foreign labor being used in cryptocurrency confidence scam compounds.”

They found other evidence tying all of the accounts to the same operation, noting that the same IP address accessed 132 of the 144 identified accounts on OKX. 

In addition to U.S. victims, investigators found others in the U.K., Australia and Germany. One of the most prominent victims was Shan Hanes, the former CEO of defunct Kansas bank Heartland Tri-State. Hanes was sentenced to 24 years in prison last year for stealing money from the bank to invest in cryptocurrency schemes. 

In the complaint, prosecutors said Hanes stole more than $50 million from the bank before he was eventually scammed himself into sending some of the funds to the cryptocurrency confidence scheme.

The complaint also noted at least two instances where lawyers reached out to the Justice Department in tacit attempts to fight the seizure effort, both of which were eventually abandoned. One of the lawyers was working on behalf of a well-known Chinese company accused by officials in the Philippines of “kidnapping and human trafficking.”

Cryptocurrency investment fraud continues to be one of the most costly crimes reported to the FBI. The FBI said more than $5.8 billion was lost last year in crypto investment schemes. 

“Cryptocurrency investment schemes can have devastating and long-lasting consequences for victims, far beyond just financial losses,” said FBI Special Agent in Charge Sanjay Virmani. “In this case, hundreds of victims lost millions of dollars to an elaborate scheme.”