Houstonians lose millions in crypto investment scams, FBI says

HOUSTON, Texas (KTRK) — Houstonians have lost anywhere from $10,000 to $1 million per person in investment scams, oftentimes involving hard-to-recover cryptocurrency.

The FBI told 13 Investigates’ Kevin Ozebek investment schemes are becoming more sophisticated as overseas scammers use artificial intelligence and chatbots like ChatGPT to “generate communication in English in a way that’s relatable and not broken.”

“We find that even if the bad actors are located overseas, their ability to communicate with people in the United States – they can make it sound as if they’re in America or they can use these different tools to translate and figure out communication in order to really attract and lure in their victims,” Cindy Quintanilla, a forensic accountant with the FBI, said. “It’s getting a lot harder for victims or the common person to be able to decipher. ‘Oh, this isn’t real,’ or ‘this person doesn’t speak good English.’”

Victims reported losing $3.31 billion in investment scams across the U.S. last year, which was up 127% from 2021, when fraud complaints totaled $1.45 billion, according to the FBI. About $2.57 billion was lost in cryptocurrency investment scams alone last year, up 183% from 2021.

Quintanilla said she believes the scams are underreported, meaning the number of victims and economic loss is even greater.

“What makes this a unique type of scam and unprecedented is the combination of the number of victims, the volume, and the speed that the frauds are happening,” she said. “Many times, these victims don’t know they’re victims until one week, one month, or several months out after they’ve already sent money. And because of the way that cryptocurrency moves, the fact that it’s irreversible, time is of the essence, and so, the sooner that victims are able to report it, the better.”

Quintanilla said scammers will recruit victims through several methods, for example, making personal connections on dating websites or through text messages and then drain those victims of all their finances.

“They might say, ‘Hi, Sue.’ And then you respond by saying, ‘It’s not me, it’s someone else.’ And then the conversation begins,” she said. “They like to use a lot of the encrypted apps, such as Signal or WhatsApp. They’ll reach out to you via LinkedIn. They’re using social media and different applications to reach out to their victims, and that’s how they’re targeting people.”

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She said scammers will search social media before even reaching out to their victim to create a profile of their target.

“They’re able to identify what vulnerabilities that person has, whether it’s a need for a romantic partner, whether it’s a lost loved one, whether it is a need to put their kids through college or a financial instability,” Quintanilla said. “They’ll figure out what it is that their target is vulnerable to, and ultimately they’ll play on that and that’s how they’ll lure people in with a friendship, with a romantic interest or a promise to resolve their financial problems.”

She said once a scammer makes a connection, there are different directions they can take. In one scenario, she said a scammer might be quick to start talking about cryptocurrency and share how much money they’ve made, with promises of how much the victim can make through investment themselves.

The FBI says the most common age for scam victims was 30 to 49 years old and that anyone can fall victim to these scams, regardless of age, gender or educational background.

“Anyone can be a target because they are so sophisticated,” Christina Garza, a public affairs officer at the FBI’s Houston office, said. “The criminals behind these schemes are very sophisticated. This is what they do. They dedicate themselves to making you fall for it, so whatever it’s going to take on their end to make it as legit looking, as sophisticated looking, they’re going to invest that time. Why? Because if I can get a million dollars out of you, it was worth my time.”

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To help sell the scheme, Quintanilla said scammers will also create fake websites where they lure victims to log online and see their financial balance and how much these fake investments have grown or decreased.

“They look legitimate, where you can see purported gains, and these gains are fraudulent, and people are falling victim to it because they’re used to seeing that in the traditional finance space,” she said.

She added once the scammer realizes they’ve “completely dried out” the victim, they will tell them that their money is stuck or that they need to pay taxes or customs fees in order to release it.

To make the scam worse, Quintanilla said the FBI found that victims will turn to the internet for help and get scammed all over again by fake companies, promising to help them recuperate their money.

“What people should know is that once money is out in the blockchain and it’s moved, no one can return it to you unless they are the owners or hold the keys to the wallet where that cryptocurrency is,” she said. “Sometimes the victims are being re-victimized because they are paying fake companies – and they’re charging $10,000, $15,000, $20,000 for these reports, and victims are paying them out of desperation to be able to recoup their assets.”

Ultimately, Quintanilla said people should be wary of investing large sums of money with people they’ve never met in person.

“Never ever invest based exclusively on the advice of someone you only met online. Do your homework, do your research, do your independent research. Don’t click on links,” she said. “If it’s too good to be true, it’s probably a scam. If it’s a promise of high return on investments very quickly, it’s likely a fraud. Big red flags.”

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She said the longer a victim takes to report the crime, the harder it is to recover the funds.

“What we find is initially the victim’s money will start out of an exchange of the United States, which are regulated. And ultimately, the subject will take the cryptocurrency. They’re laundering it. They’ll move it through several wallets, and then, they’ll cash it out at a foreign exchange. And so, sometimes there can be challenges,” she said.

What to do if you’re a victim

The FBI said shame is one reason people may not report when they’re a victim of this type of crime. However, the agency encourages victims to report it as soon as possible.

“We understand why there might be some shame around it, especially if you think, ‘Well, I should have known better,’” Garza said. “Anyone can become a victim regardless of your socioeconomic status or your education level, but don’t let this shame stop you. You have been a victim of a crime. Let the authorities know. Let us help. The sooner, the better. The sooner that you’ve realized that you’ve been scammed, report it immediately, because that gives the law enforcement at least that much ahead of time to try and get behind it.”

Victims can file an internet fraud report online at IC3.gov, where you should provide as much information as possible, including transaction details, phone numbers and any communication.

IC3.gov is also the FBI’s criminal complaint center that provides information on consumer alerts regarding internet schemes, as well as the trends they’re seeing.

“(The) overall message is for people to understand that cryptocurrency investments are a risky investment,” Quintanilla said. “They need to make sure that they’re doing their research, that they’re comfortable with the money that they’re putting in, that they’re not overextending themselves, and that they’re getting the proper advice from the right people before they make these type of investments, whether it’s through a connection that they met online or through a firm that they’re researching.”

For updates on this story, follow Kevin Ozebek on Facebook, Twitter and Instagram.

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