Fraud, climate change and ‘pig butchering’ – welcome to the dark side of cryptocurrency
Written by Jasper Hamill
Published at 4/17/2022, 10:24:00 PM
Business was bad during the pandemic, so when mum-of-four Freya thought came across what she thought was a viable investment opportunity, she was sure it would turn everything around.
However, instead of changing her fortunes, she and her family soon discovered it was a cruel scam that would cost them a fortune.
Freya, 48, is now more than £30,000 out of pocket after being scammed by a mysterious and unlicensed cryptocurrency firm that claimed to be based in Canary Wharf.
‘It was devastating,’ she admits. ‘When something like this happens, it becomes hard to trust anyone again.’
Freya is one of many people who have fallen victim to con artists who promise huge payouts to people who invest in the volatile crypto markets – but end up being robbed of vast sums of money.
Digital currencies like Bitcoin and Ether operate without the need for central banks and government control, raising utopian hopes that crypto can be used to create a better, fairer financial system. However, its decentralised nature also offers criminals anonymity and the ability to target victims from anywhere in the world.
And the impact is not just financial, as crypto also poses a serious risk to the planet. Mining crypto – the process of verifying transactions and generating new coins – uses vast amounts of electricity and creates the same amount of CO2 each year as a small country.
Directly contributing to climate change, it’s ecological impact is so serious that President Biden ordered officials to urgently investigate ways to reduce the “negative climate impacts and environmental pollution” of crypto in a recent executive order.
Freya, from Telford, runs a business with her husband. As well as looking after her children, she provides care to her elderly mother, who has dementia, and father, who suffered a stroke that left him unable to speak.
Freya and her family lost thousands after being targeted by Crypto scammers (Picture: Getty Images)
In search of new income streams during a pandemic slowdown, the mum-of-four, who had a basic understanding of crypto, tells Metro.co.uk that she opened a Bitcoin trading account to pursue investment and then ‘came across’ a company called Invxsler online, in May 2021.
Marketing itself as a crypto investment service that offers huge returns, on the company’s website, it claims to allow customers to ‘trade like an expert and increase your profits with the power of 100X leverage’. In other words: send us your money and we’ll earn you 100 times as much.
‘Work had been a struggle due to Covid and Brexit,’ explains Freya. ‘We knew someone that had earned enough money trading bitcoin to put a deposit on a house in London. Plenty of people had earned a lot of cash so I thought I would give it a go. I wanted a company that seemed a bit more hands-on and Invxsler fitted the bill. How wrong could I be?’
Wanting to make sure that she was choosing a reputable company, Freya did some digging online and found ‘plenty’ of articles that claimed Invxsler was trustworthy. So, she sent them £200 to invest in crypto. Requests for more money began almost immediately.
An ‘account manager’ called Nina, who claimed to be Danish, phoned Freya’s husband and persuaded him to transfer more than £3,000 after doubling down on the false promises of the scheme.
‘They are really professional and good at what they do,’ Freya explains. ‘They talk about the weather, ask about the kids. You begin to trust them, but what they are really doing is taking you down a wormhole.’
Nina then started to call Freya every day, asking intimate questions about her family life, which did not seem worrying at the time due to the skill of the scammers. Freya told Nina about her money worries and her parents, and even began to regard her as a friend. Nina even managed to persuade their eldest child, who was over 18 at the time, to open an account with £1,000 – which was also never returned.
The scammers even persuaded Freya’s 18-year-old daughter to part with money to invest in cryptocurrency (Picture: Getty Images/iStockphoto)
Then came the next stage in the scam. Freya was passed on to a ‘manager’ called Martin who claimed to know about another way of making even more cash.
She recalls: ‘He said we could make lots of money, but would need £10,000. The website looked professional and there were hardly any bad reviews at that point. The company was very good at talking to you in a caring, happy way as if they wanted us to profit.’
However, soon after both Nina and Martin claimed to have caught Covid, so a new representative called ‘Ian’ stepped in, explaining that he was building a group account that would raise one million pounds to be shared among 20 people.
Freya was invited to join, as long as she invested £18,000 – an amount she was assured would massively increase. In July 2021, Freya and her husband took the cash out of their business and handed it over to Invxler
‘This money was only needed for three days, we were told,’ she recalls. ‘Now we can’t withdraw it. I can’t access any of my £32,545 investment.
‘They brainwash you and try to pressure you into making fast decisions by saying that you will lose out on a lot of money unless you invest right now.’
However, their ordeal didn’t end there. The company kept asking Freya for money by putting more pressure on her to act quickly – a classic scammer tactic. She was told the group had now made each member £250k. However, the price of bitcoin was dropping fast and she would lose £30k unless she paid more than £20k.
The thought of parting with any more cash sent alarm bells ringing and Freya began asking more questions, demanding to get her money back or, at the least, to see some terms and conditions.
Since then, she has been waiting months for a call from Ian, but he never phoned.
And Freya is yet to see any of her money returned – despite calling the police and Action Fraud as well as filing a complaint with her bank and the crypto exchange she used to send payments.
After losing over £30k, Freya is speaking out to help others avoid falling victim to a similar crime.
‘I still find it upsetting and have lost confidence in myself,’ she admits. ‘I wouldn’t say I was a vulnerable person but if it can happen to us, it can happen to anyone. We were not able to get our money back.
The family are speaking out to warn others so they don’t fall victim to the scammers (Picture: Getty Images/iStockphoto)
‘They knew about our four kids. We told them that my parents were ill and elderly. But they didn’t care. I feel most guilty about my daughter, who also lost £10,000. It makes my stomach turn.’
Since the family were ripped off, the Invxler website has changed its address, but is still available online. Although a Google search now shows scam warnings and bad reviews, the fake positive reviews can still be seen. Metro.co.uk found one website that claimed Invxsler is a ‘luxury brokerage aiming to satisfy serious clients with a diverse service’ and discusses its ‘services’ in an authoritative, expert and convincing tone.
The Financial Conduct Authority has also issued a warning which states: ‘We believe this firm may be providing financial services or products in the UK without our authorisation [so] you should be wary of dealing with this unauthorised firm.’
Jane Lee is a Trust and Safety Architect at the digital fraud prevention company Sift, in San Francisco, whose work is dedicated to investigating new types of fraud.
She told Metro.co.uk about a dating site crypto scam called ‘pig butchering’. The name reflects the cruel, sadistic attitude scammers have towards their victims – and even appears to mock them.
‘In this scam, victims are referred to as pigs being prepared for slaughter,’ she explains. ‘They are raised for their meaty profit under the promise of “happily ever after” and big crypto wins. In reality, the victims are everyday people who are left financially and emotionally devastated.’
The ‘Pig Butchers’ spend months gaining the trust of people they meet on dating apps, using both romance and the false lure of fast crypto returns to swindle victims out of their savings.
They start by setting up fake profiles, matching potential victims and building trust before moving the conversation to WhatsApp, which is encrypted and allows the scammers to maintain anonymity and reduce their risk of getting caught. The victims are then won over with romantic messages and the promise of expensive gifts.
‘Inevitably, the conversation turns to money,’ says Jane. ‘The scammer will sell the allure of crypto gains, bragging about how much they’ve made investing, and promising to coach their target so they can earn a little extra cash, too.’
Scammers are also ‘romancing’ victims so they hand over money to ‘invest’ in crypto (Picture: Getty Images)
Victims are told to create an account on a legitimate crypto platform and then sent a link to a fake trading site controlled by the scammer. As victims ‘invest’, they are instantly shown fake graphs and metrics showing ‘profits’. Scammers persuade them to hand over as much money as they can and then simply disappear when asked to pay out earnings or give back the initial deposit.
Louise Bennett, who is civil fraud, cryptocurrency, and asset recovery partner at Keystone Law, has worked on several romance fraud cases in which criminals set up profiles on dating sites and persuade victims to transfer money.
In one scam, a victim lost £83,515 of life savings after falling prey to a ‘honeytrap’ on Tinder and being talked into opening an account with the crypto exchange Binance and then transferring cryptocurrency Tether (USDT) to a ‘bogus electronic platform’.
‘Romance frauds have dramatically increased due to the pandemic when communications moved online,’ says Louise. ‘My practise for this type of work has doubled in the past two years and I receive regular enquiries about honey trap scams, involving people losing thousands of pounds of cryptocurrency.
‘Fraudsters are very sophisticated, and these types of online romance scams are, more often than not, committed by members of a large organised criminal gang. The crypto world is largely unregulated, so it is ripe territory for fraudsters.
‘Thousands of frauds being committed daily and is on the rise across the board. As we are using online dating tools more than ever, it follows that we are seeing increased frauds within the honey trapping sphere.’
In fact, in the murky world of crypto fraud, no tactic is off-limits. This year, for instance, scammers have been taking advantage of the war in Ukraine. For the past two years, they have been preying on fears about the pandemic.
One group of criminals set up a fake currency called UkraineTokens. Anyone who bought it thought they were donating money to civilians affected by the conflict. In fact, they were simply giving money to fraudsters in exchange for a worthless currency. Criminals have also posed as refugees looking for crypto donations on social media or set up fake charity websites. The results are the same. Victims send over their crypto and never see it again.
‘Scammers will always take advantage of chaos,’ explains Michal Salat, threat intelligence director at the cybersecurity firm Avast. ‘By their nature, scammers don’t operate ethically and will take advantage of people trying to help the most desperate.’
Criminals are even using the conflict in Ukraine as a way to scam money (Picture: REUTERS)
It is often very difficult to identify the scammers because they are adept at hiding their tracks. However, some unlikely people have been associated with questionable crypto schemes.
Kim Kardashian was one of three celebs sued in a class action this year after she wrote an Instagram post about a cryptocurrency called EthereumMax.
‘Are you guys into crypto????’ Kardashian posted. ‘This is not financial advice but sharing what my friends just told me about the Ethereum Max token!’
After Kim’s post, the currency skyrocketed in value before plunging to a value of next to nothing. Kim has not yet spoken out on the incident, which Charles Randell, chairman of the Financial Conduct Authority described as the ‘financial promotion with the single biggest audience reach in history’.
The rise of so-called ‘finfluencers’ has also given criminals a new way to reach victims, says Sharon Davies, CEO of Young Enterprise.
‘Given the financial pressures of the pandemic and increase in social media usage, young people are more vulnerable than ever to online scams,’ she warns. ‘They are being drawn in by ‘get rich quick schemes’ and the misconception that brands and figures with large social media followings must be credible.
‘One common scam is fake brand collaboration requests, from people who appear to be working on behalf of a brand offering paid work. The majority of the time these ‘DM to collab’ offers are scams which trap users into buying products, and usually don’t exist.
‘Another type of scam that has surged in popularity during the pandemic centres around cryptocurrency investments. Young people see their favourite celebrities and influencers appearing to promote opportunities to invest in these digital currencies which can result in them nursing big losses.’
The energy used during crypto mining is causing huge damage to the environment (Picture: Getty Images)
With crypto using large amounts of energy during ‘mining’, miners having to keep their computers running for a very long time just to process a single block, which uses a total of 150,000 kilowatt-hours of energy – enough to power 170 average US homes for a month.
“When you consider that crypto mining and transactions take place all over the world on a daily basis, the size of the problem quickly becomes apparent,’ explains Ivan Liljeqvist, a crypto industry expert and CEO of the blockchain development firm Moralis. ‘Several studies have already shown that bitcoin mining uses more electricity globally per year than in some small countries, which is frightening.’
Meanwhile, Jeremy Cheah, associate professor of decentralised finance at Nottingham Business School, adds that there are ‘numerous examples’ of communities ‘enduring’ the environmental impact of crypto.
‘Crypto mining has been shown to disproportionately impact the poor and vulnerable,’ he tells Metro.co.uk.
In the Democratic Republic of Congo, locals are often ‘outcompeted’ by miners who use up cheap renewable electricity, meaning they cannot afford to power their homes. In Kosovo, 90% of crypto mining was powered by burning reserves of lignite – a type of cheap, low-grade coal – before the government banned mining.
‘At the height of the recent energy crisis, Kosovans experienced rolling blackouts across the country due to energy shortages,’ Cheah continues. “There are also other examples where environmental, labour and business groups are pressuring their local and national governments to act by banning mining. For example, the bitcoin mining activity has threatened New York’s climate and water quality by way of excessive carbon emissions and toxic chemicals being released into the air.’
While Cheah warns that ‘unfettered crypto mining activities’ will ‘impede the progress and realisation’ of the COP26 climate change goals of keeping global warming down to 1.5 degrees, there is hope on the horizon. Ethereum, the world’s second-largest cryptocurrency, is moving towards a new consensus mechanism called proof of stake, which uses less energy. Other cryptocurrencies already use greener tech, so this trend is likely to continue.
The police are also becoming more adept at catching the bad guys. It is often claimed that crypto is as untraceable as cash, but this is not true. In fact, the blockchain is allowing investigators to trace and claw back stolen money, something demonstrated in February 2022 when police seized $4.5 Billion stolen from the exchange Bitfinex in 2016.
However, with crypto scammers still rife and environmental issues some way from being solved, the dark side of this virtual reality will continue to cast a shadow across the world of crypto.