International effort reveals $4.3 million lost in Ethereum wallet scam
A coordinated operation led by the British Columbia Securities Commission (BCSC) has uncovered a widespread crypto fraud scheme that has impacted nearly 100 Canadians, the regulator announced.
The operation, codenamed Operation Avalanche, was carried out during Fraud Prevention Month and involved a coalition of securities regulators, police forces, registered crypto trading platforms and blockchain analysis firm Chainalysis. It focused on disrupting ongoing cryptocurrency scams by directly alerting individuals whose digital wallets had been compromised.
New approach to online fraud
The operation took place March 11 and 12, targeting a tactic known as “approval phishing.” This form of fraud tricks individuals into unknowingly giving fraudsters permission to withdraw crypto assets from their wallets on the Ethereum blockchain.
Investigators identified and contacted 89 individuals by telephone or email after locating compromised wallets on the Ethereum blockchain. The BCSC noted that these efforts are part of a shift in strategy, as traditional enforcement methods are often ineffective against scammers operating from outside Canada.
“Our traditional method of investigating, prosecuting and sanctioning won’t work for these scammers, who are often organized crime groups operating in other countries, largely beyond our reach,” said Lori Chambers, BCSC deputy director of enforcement.
“So we’re finding new ways to disrupt their activity. One way is proactively alerting victims, often while the con is still unfolding – interrupting the scheme and preventing the bad actors from getting the stolen funds. Even if we don’t catch the perpetrators, anything we can do to make their life harder is worthwhile.”
Transnational fraud schemes
By tracing the origin of funds using blockchain analysis, Chainalysis helped determine whether stolen crypto had flowed through participating trading platforms.
If it had, regulators then contacted those platforms – such as Netcoins Inc., Ndax Canada Inc., Coinbase Canada Inc., Wealthsimple Investments Inc., and Shakepay Inc. – to obtain contact details for the wallet owners. Kraken and Coinsquare also supported the investigation.
The wallets identified during the operation were drained of approximately $4.3 million in assets. The fraudulent schemes appeared to be part of long-term investment scams, commonly referred to as “pig butchering.”
Operation Avalanche saw collaboration between several Canadian and international agencies, including the Alberta Securities Commission, the Autorité des marchés financiers, the Ontario Securities Commission, the Vancouver and Delta police departments, the RCMP, and the US Secret Service.
The BCSC plans to make the proactive alerting strategy a regular feature in its efforts to combat online investment fraud.
More information on crypto fraud prevention and victim assistance is available at the BCSC site.
