Cryptocurrency experts and law enforcement agencies in six countries worked together to shut down scam networks that made more than $1 billion from “authorization phishing” scams — where hackers trick people into allowing them to spend tokens in a victim’s crypto wallet.
The effort – dubbed “Operation Spincaster” – involves 17 crypto exchanges, including Binance and NDEX working with 12 public sector agencies on a series of “operational sprints” designed to disrupt the scam.
The operation began in March in Canada when the Calgary Police Service worked with Chainalysis on the initial pilot project.
Danny Leong, the blockchain investigation team sergeant with Calgary police, said in a statement that his team worked with Chainalysis earlier this year to host a private workshop where they met more than 770 individuals, 119 of whom were Canadian , identified as victims of cryptocurrency fraud. with an estimated combined loss of $59 million.
Through the workshop, several Canadian law enforcement agencies were able to notify those affected and prevent further crypto theft.
“Through this workshop, the participating organizations acted quickly to notify the affected individuals to prevent further victimization,” Leong said.
Chainalysis said it initially launched the effort after reporting in December about $1 billion in losses from approval phishing scams since May 2021. After that report, the company’s experts identified more illegal addresses and updated the number to more than $2.7 billion in losses since 2021.
Chainalysis used their findings to work with law enforcement agencies in the US, UK, Canada, Spain, the Netherlands and Australia on a series of sprints from April to June 2024 in which they trained officers on how to identify compromised wallets and the trace stolen funds. .
“More than 7,000 leads were distributed during these rushes related to approximately $162 million in losses. These leads were used to close accounts, seize funds and build intelligence to prevent future scams,” explained Chainalysis.
“In fact, in one of the sprints, participants were able to contact a victim directly to alert them to a scam in progress, prompting the victim to take preemptive action up the chain by revoking approval before the scammer was able to a six-figure sum.”
Celestino Calabrese, acting head of illicit financial threats at the UK’s National Crime Agency, said they were able to identify 230 victims in their country and found more than $33 million in funds they believe were the result of clearance phishing.
“This work has protected victims here in the UK and provided opportunities for us to pursue organized crime groups that cause significant harm,” Calabrese said. “Many of these groups are based overseas and use sophisticated methods to gain the trust of unsuspecting investors.”
Chainalysis did not respond to requests for comment on how much of the money was recovered by law enforcement and returned to victims.
Endorsement phishing is a tactic typically used in conjunction with other popular scam techniques such as romance scams or fake crypto application schemes.
The scammers usually trick victims into signing a malicious blockchain transaction that gives the scammer’s address approval to spend specific tokens in the victim’s wallet, which allows the scammer to then drain the victim’s address of those tokens at will.
Australian Federal Police Detective Superintendent Tim Stainton said Operation Spincaster had “shined a clear light on new tactics being used by cybercriminals in their continued efforts to defraud Australians,” adding that it would play an important part form of their ongoing investigations to identify cybercrime. victims and disrupting perpetrators in Australia.
Binance’s Erin Fracolli added that the effort helped crypto firms track down stolen funds, identify affected users and warn them of the scam.
Earlier this year, Singapore-based cyber firm Group-IB published its own report on a similar scam where victims were tricked into connecting their cryptocurrency wallets to an attacker’s infrastructure. That scheme saw hackers steal at least $80 million worth of assets from its victims’ digital wallets.
According to the FBI, $3.94 billion in losses suffered by Americans last year were linked to cryptocurrency investment fraud.
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