U.S. and Canadian Law Enforcement Collaborate to Uncover and Disrupt Multi-Million Dollar Crypto Scam

Summary

• Joint U.S.-Canadian Law Enforcement Operation Disrupts $4.3M Ethereum Scam: Operation Avalanche, a collaboration between the U.S. Secret Service and Canadian authorities, targeted “approval phishing” scams on the Ethereum blockchain, estimated to have defrauded victims of $4.3 million.

• Proactive Outreach to Victims of “Approval Phishing”: Even though they hadn’t yet lost funds, the operation proactively identified and contacted Ethereum wallet holders who were at risk or compromised. “Approval phishing” is a tactic where scammers trick users into granting permission for token theft, often in romance scams.

• Growing Focus on Cryptocurrency Crime by Law Enforcement: This operation is part of a larger trend of increased cryptocurrency-related enforcement actions by the U.S. Secret Service and other agencies, as seen in the recent shutdown of the Garantex crypto exchange, highlighting the significant and growing problem of crypto scams.

Victims of sophisticated “approval phishing” tactics targeting Ethereum users are being contacted as part of a joint international law enforcement operation, regardless of whether they have already experienced financial losses.

International Operation Targets “Approval Phishing”

Cybercrime experts from the U.S. Secret Service have joined forces with Canadian authorities to dismantle a sophisticated cryptocurrency fraud, estimated to have defrauded victims of $4.3 million.

This scheme utilized “approval phishing,” a method where malicious actors manipulate cryptocurrency users into authorizing transactions that grant them the ability to illicitly transfer digital tokens from the victim’s accounts.

Romance scams, often referred to as “pig butchering,” frequently employ these deceptive tactics.

Operation Avalanche: Proactive Victim Outreach

Operation Avalanche, a collaborative effort unrelated to the blockchain platform of the same name, was initiated to identify Ethereum wallets compromised by these scams.

The investigators proactively contacted the owners of these wallets, extending assistance to both individuals who had already suffered financial harm and those identified as being at immediate risk of becoming victims.

Wide Range of Law Enforcement and Crypto Expertise Involved

This extensive law enforcement operation was spearheaded by the U.S. Secret Service and the British Columbia Securities Commission.

Crucial support and resources were contributed by a wide array of agencies, including the Ontario Provincial Police, the Alberta Securities Commission, L’Autorité des marchés financiers (Quebec), the Ontario Securities Commission, the Delta Police Department, the Vancouver Police Department, and the Royal Canadian Mounted Police.

Furthermore, the operation benefited from the involvement of an undisclosed cryptocurrency exchange and a specialized blockchain analytics firm.

Commitment to Asset Recovery and International Collaboration

Special Agent in Charge Matt McCool, representing the U.S. Secret Service’s Washington Field Office, affirmed his agency’s dedication to international collaboration with Canadian law enforcement and financial institutions.

He emphasized their ongoing commitment to identifying, seizing, and returning illicitly obtained cryptocurrency assets to the individuals who were defrauded.

Secret Service’s Increasing Focus on Crypto Crime

It is noteworthy that this intervention is not an isolated event for the Secret Service, which has increasingly focused on cryptocurrency-related enforcement.

Just last month, the agency was instrumental in shutting down the website of Garantex, a Russia-based cryptocurrency exchange.

That previous operation, also a joint effort, cited Garantex’s links to cybercriminal networks and sanctioned Russian financial institutions, notably including groups associated with darknet ransomware.

The Significant Scale of Approval Phishing Scams

The prevalence and damaging impact of approval phishing scams in the cryptocurrency sphere are significant.

Independent analysis from Chainalysis, a blockchain intelligence firm, indicates that victims lost approximately $2.7 billion to these scams between May 2021 and July 2024.

Chainalysis analysts further emphasize that this figure likely underestimates the true scope of the problem, as many instances of approval phishing go unreported and remain undetected.

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