As a new generation of investors cheers the revival of bitcoin, many of them could become victims of scams conjured by burgeoning criminal networks that enlist more recruits to dupe unsuspecting investors.

How crypto investigators uncover scammers’ blockchain billions in Asia

The billion-dollar industry often targets individuals who are tricked into working at huge scam centres where, through violence and intimidation, they are forced to defraud legions of investors. Illegal cryptocurrency platforms are invariably used to swindle victims, experts say.

In Singapore alone, scam victims reportedly lost S$651 million (US$486 million) last year – likely an understated figure as many incidents are never reported by victims due to fear of stigmatisation.

The process usually starts with scam syndicates dangling bait for recruits.

The International Justice Mission (IJM), an anti-human trafficking organisation, says criminals typically use social media platforms to advertise supposedly lucrative jobs. When victims take the bait and arrive at locations arranged by the traffickers, their passports and mobile phones are confiscated to prevent them from leaving or calling for help.

Hundreds of thousands of workers have been enslaved to work for scammers in the region, according to IJM.

Jackie Burns Koven, a cyberthreat analyst, said, scammers often target their victims via a fraudulent cryptocurrency trading platform.

“So in most cases, there’s a sophisticated web layout where individuals or victims depositing funds will see that there are excellent returns on their investment every time they log into this platform, said Koven, head of Cyber Threat Intelligence at Chainalysis, a blockchain analysis firm.

“But that is all a sham. The funds are going straight to the scammer’s wallet. If you want to withdraw the money, investors are asked to pay steep fees that essentially leave them high and dry.”

Unsuspecting investors are often lured through emotional pitches of friendship and romance on messaging apps by people who appear to lead glamorous lifestyles. Once an initial pitch is accepted, offers of extravagant returns on cryptocurrency funds often follow.

Scammers typically exploit the emotional vulnerability of victims to gain access to their credentials through compromised private keys and networks.

However, since cryptocurrencies such as bitcoins run on a foundation of blockchain technology – a digitally transparent network – frauds can be traced, forcing scammers to move to other platforms.

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Various scams from multiple digital domains are often carried out from the same physical site but operators can abandon their posts when they face an intensifying dragnet and shift to other locations quickly.

With a new pooled investment security in cryptocurrency introduced in the US in January and skyrocketing values, more first-time investors are likely to become entangled. Even prudent and savvy investors can fall victim due to the lack of awareness of online scams in some countries.

In the past year, Singapore and Hong Kong have unveiled new rules to safeguard investments in digital currencies.

Awareness campaigns are important to warn consumers of scams. But regulators should also up their game and stay ahead of scammers and be prepared for every new way they can think of to lure unsuspecting consumers.

With growth in the ecosystem of digital currencies accelerating, regulators must consider these campaigns as the top priority to combat the scam networks that threaten to spiral out of control in Asia.