Case #4
Fake tokens
With the advancement of cryptocurrency technologies and the growing popularity of decentralized platforms, new fraudulent schemes have emerged, exploiting users' trust and desire for quick profits.
One such scheme involves fraud using fake tokens. The essence of this scam is that fraudsters create a fictitious platform or project, offering the purchase of promising tokens or participation in investment opportunities with allegedly high returns.
The victim transfers their cryptocurrency assets to the scam platform’s account and, in return, receives tokens with no real value or functionality. The popularity of this scheme is due to several key factors.
• First, fraudsters use professionally designed websites, advertising campaigns, and promises of high profits to instill false trust in their victims.
• Second, the high volatility and complexity of the cryptocurrency market mean that many users lack the technical knowledge to identify scams, making them vulnerable to manipulation.
• Third, human greed and the desire for quick wealth often override caution and common sense, allowing fraudsters to exploit victims' emotional states effectively.
This scheme highlights the importance of increasing user awareness of how the cryptocurrency market works, verifying platform reliability before making transactions, and using reliable security tools such as crypto address verification and project reputation analysis. A comprehensive approach to security can help users minimize risks and avoid losses in this rapidly evolving industry.
• First, fraudsters use professionally designed websites, advertising campaigns, and promises of high profits to instill false trust in their victims.
• Second, the high volatility and complexity of the cryptocurrency market mean that many users lack the technical knowledge to identify scams, making them vulnerable to manipulation.
• Third, human greed and the desire for quick wealth often override caution and common sense, allowing fraudsters to exploit victims' emotional states effectively.
This scheme highlights the importance of increasing user awareness of how the cryptocurrency market works, verifying platform reliability before making transactions, and using reliable security tools such as crypto address verification and project reputation analysis. A comprehensive approach to security can help users minimize risks and avoid losses in this rapidly evolving industry.
Interviewing the Victim
Through discussions with AML Crypto experts and guided questioning about the incident, any victim of fraud can better understand how and where their stolen crypto assets were transferred and at what point the deception occurred.
AML Crypto was approached by a victim (identity withheld for privacy) who had fallen prey to a fake token scam via a fraudulent platform. The victim shared their story, vividly illustrating how fraudsters manipulate users by exploiting their desire for quick profits and lack of sufficient knowledge.
The story began when the victim came across an advertisement for a new cryptocurrency project promising high-yield token investments
The advertisement was convincing: a professional website with growth charts, testimonials from "successful investors," and an attractive bonus — 20% extra on the first investment. Believing it to be a great opportunity, the victim registered on the platform and transferred their cryptocurrency to the scammers' designated address.
After sending funds, the victim received tokens that appeared legitimate but later turned out to be worthless. Moreover, when attempting to withdraw funds, the scam platform demanded additional "fees" to activate the withdrawal function. Believing this to be a standard procedure, the victim transferred more funds, after which their account was blocked.
After sending funds, the victim received tokens that appeared legitimate but later turned out to be worthless. Moreover, when attempting to withdraw funds, the scam platform demanded additional "fees" to activate the withdrawal function. Believing this to be a standard procedure, the victim transferred more funds, after which their account was blocked.
Seeking a solution, the victim turned to AML Crypto. The investigation revealed that the platform was entirely fraudulent and the tokens were artificially created by the scammers. They were not listed on any known exchanges. The platform merely simulated a real cryptocurrency exchange, with all displayed transactions and balances being fake.
Fake tokens are counterfeit cryptocurrencies created by fraudsters to deceive users. They can mimic legitimate tokens by copying their name or ticker but have no actual value. Typically, these tokens cannot be sold or exchanged for real assets as they exist only within a system controlled by the scammers.
Blockchain Investigation
To analyze the fraudsters' laundering activities in the blockchain, we examined a multi-step scheme outlining the connections between the victim’s address, the scammer’s address, and centralized services (a graphical representation of the involved addresses).
Step 1: Exchanging the Victim’s Cryptocurrency for Fake Tokens
The scam begins with the victim interacting with a so-called trading mentor. The victim is drawn into the scheme through conversations with people promising high returns while being guided by a "specialist" who supposedly only charges a commission on successful trades. The main goal is to convince the victim of the effectiveness and profitability of working with the mentor, creating the illusion of potential income.
While working with the mentor trader, the victim created the necessary accounts and a cryptocurrency wallet to conduct transactions. After performing a number of transactions on the centralized platform, the trader suggested switching to a third-party platform, claiming that it had lower commissions and favorable rates, which in turn would lead to more income.
After agreeing to the mentor’s proposal, the victim transferred cryptocurrency to the address of the fraudulent service and began making transactions on the platform. Later, when the victim decided to withdraw some assets from the service in order to cash out via the MEXC cryptocurrency exchange, she encountered a problem: when she tried to deposit crypto-assets on the platform, the exchange rejected the transaction, notifying the victim that the tokens were fake and had no value.
While working with the mentor trader, the victim created the necessary accounts and a cryptocurrency wallet to conduct transactions. After performing a number of transactions on the centralized platform, the trader suggested switching to a third-party platform, claiming that it had lower commissions and favorable rates, which in turn would lead to more income.
After agreeing to the mentor’s proposal, the victim transferred cryptocurrency to the address of the fraudulent service and began making transactions on the platform. Later, when the victim decided to withdraw some assets from the service in order to cash out via the MEXC cryptocurrency exchange, she encountered a problem: when she tried to deposit crypto-assets on the platform, the exchange rejected the transaction, notifying the victim that the tokens were fake and had no value.
It turned out that when funding the fraudulent site, the victim was actually withdrawing cryptocurrency from his account on the exchange to the fraudsters' blockchain address. At that time, the platform displayed identical amounts in the victim’s personal account, creating a false impression of successful transactions and stable growth of assets.
Step 2: Fraudsters Launder the Stolen Funds
During the withdrawal attempt, the victim was credited with fake tokens, maintaining the illusion of legitimacy. Meanwhile, the real cryptocurrency initially deposited by the victim was already laundered by the scammers.
The investigation of such cases is based on two key aspects:
- analyzing the chain of cryptocurrency movement through the fraudsters' blockchain addresses to centralized platforms.
- investigating the creator of the fake tokens, as the blockchain often stores information that can help identify the person responsible for creating the tokens of no real value used in this incident.
In our incident, the fraudster, after receiving cryptocurrency at his address, took steps to make the transaction chain more difficult to trace by making transfers to four different addresses. He then pooled funds at two addresses and eventually one, from where the cryptocurrency was transferred to centralized cryptocurrency exchanges Binance, BingX and Bybit.
AML Crypto specialists were able to obtain this valuable data for the investigation thanks to our company’s solutions and databases.
AML Crypto specialists were able to obtain this valuable data for the investigation thanks to our company’s solutions and databases.
Recommendations
When engaging in crypto transactions, it is essential to verify counterparties and tokens using available AML (Anti-Money Laundering) services. Additionally, utilizing blockchain explorers to track and analyze transactions in real-time helps mitigate risks associated with fraud and illicit activities, ensuring greater security and transparency.
Overview of information on the present USDT token on the Ethereum blockchain network. Info taken from etherscan.io
Overview of information on the present USDT token on the Ethereum blockchain network. Info taken from etherscan.io
Incident results
positive
The stolen funds were recovered and returned to the client
This case highlights the scale of cryptocurrency fraud and emphasizes the need for a comprehensive security approach. Thanks to AML Crypto's efforts, a multi-layered scam involving fake tokens, fraudulent platforms, and sophisticated laundering techniques was uncovered. The investigation identified transit and deposit addresses linked to centralized exchanges, playing a key role in recovering stolen funds for the victim.
Alongside the investigation report, AML Crypto specialists prepared legal request templates for law enforcement agencies to submit to relevant cryptocurrency exchanges. These requests successfully led to obtaining information that exposed the identities of the fraudsters.
This incident serves as a crucial reminder of the importance of financial literacy and careful verification of platforms, counterparties, and assets before conducting transactions. Utilizing AML tools, blockchain explorers, and token verification services helps minimize risks and prevent fraud.
Alongside the investigation report, AML Crypto specialists prepared legal request templates for law enforcement agencies to submit to relevant cryptocurrency exchanges. These requests successfully led to obtaining information that exposed the identities of the fraudsters.
This incident serves as a crucial reminder of the importance of financial literacy and careful verification of platforms, counterparties, and assets before conducting transactions. Utilizing AML tools, blockchain explorers, and token verification services helps minimize risks and prevent fraud.
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