It has been busy at the Portuguese Association of Blockchain and Cryptocurrencies (APBC). “We must have thousands of emails with fraud complaints and requests for information,” said Fred Antunes, founder of the APBC and the president of its General Assembly. But this is just the visible tip of the crypto iceberg. The iceberg below the surface reveals that fraud and cryptocurrency misplacement complaints already exceed 25 million euros in total. There’s talk of a case leading to a 6 million euro loss. At the National Unit for Combating Cybercrime and Technological Crime of the Judicial Police (UNC3T), the numbers are alarming: “From 2022 until now, around 3,000 inquiries related to crypto assets have been opened,” says Carlos Cabreiro, UNC3T’s director.
The cryptocurrency circuit has had a recent surge in losses and fraud. According to Fred Antunes, “It can all start with a phone call attempting to solicit investments in cryptocurrencies allegedly promoted by a celebrity.” These callers exhibit a level of professionalism comparable to those selling new telecommunications contracts, but the goal remains the same: investment in cryptocurrencies through exchanges or brokers that may not even exist. Additionally, there is misleading advertising spread through social networks, television and radio channels, and newspapers.
For your information, here are the most common types of fraud:
- Fake platforms: These proliferate with ads that use images of celebrities without their knowledge or consent. Once investments are made, they present charts with gains that don’t correspond to reality to encourage further investments. Generally, withdrawal requests are followed by a hefty fee, which serves as the last part of the theft. The likelihood of a refund is slim, and even if there is a refund, the fee is lost.
- Credential theft: This involves malicious codes that infect computers and phones or alerts via email, SMS, WhatsApp, or phone from fake cybersecurity experts who, in reality, are cybercriminals seeking access to cryptocurrency wallet credentials.
- Unprofitable crypto: Cryptocurrencies proliferated in the past decade (in Portugal, the crypto escudo was possibly the first). They can vary with supply and demand, but they are not supervised. Some cryptocurrencies, while not illegal, lose value, but there are also cryptocurrencies created solely to divert money with a worthless product.
A factor that makes these cases particularly troubling is that many people do not understand how crypto assets work and/or are simply willing to invest all their savings when confronted with promises of extraordinary returns. In these scenarios, nothing prevents someone from posing as a broker or exchange agent and contacting consumers from the other side of the globe with supposed financial applications that promise extraordinary returns, which are specifically designed to encourage victims to invest more.
“Fake crypto asset investment platforms have mushroomed in Europe and around the world,” confirms Cláudia Pina, a Portuguese judge working as a seconded expert at Eurojust.
At the Bank of Portugal, requests for information and clarification have increased in priority. The Bank provides a page identifying companies registered to operate in Portugal and also recommends consulting the CMVM (Securities Market Commission) to verify the credibility of intermediaries that advertise different services on the web. However, between 2022 and today, the Bank of Portugal has opened more than 100 investigations into entities operating irregularly in Portugal. Most were referred to the Public Prosecutor’s Office, according to Bank officials. These cases include reinventions of the famous Ponzi schemes, but there are also investments that were never made or were directed towards non-existent currencies.
As cryptocurrencies have become part of routine investment strategies, some crypto fortunes have been made but also many fortunes have been lost in the form of bankruptcy – something that would be impossible without blockchain technology. The visibility it provides enhances trust but does not guarantee security. It is possible to track which machines contribute to each process, but there’s a catch. According to Cláudia Pina, “Even if you can identify which transaction was made, there is no guarantee that the individuals who conducted the transactions can be identified.”
To complicate matters, cybercriminals use mixers and tumblers that function as convenient exchange houses to convert a certain amount into different cryptocurrencies. According to Nuno Serdoura, a prosecutor at the Public Prosecutor’s Office, Portuguese authorities lack training and tools for automated cryptocurrency transaction tracking. Carlos Cabreiro denies such a thing, although he admits that the “abnormal case boom of the last two years” led to the creation of a specialized group for investigating crypto assets within UNC3T.
Note that there has also been encouragement for the establishment of groups to investigate crypto assets in different departments of the Judiciary Police, and in parallel, training has been provided to more than 120 professionals with accredited platforms for exchanging and making transactions with different cryptocurrencies, such as Binance or Coinbase, or authorities such as Europol, the FBI, or American intelligence services.
Considering the number and context of these alarming cases, there is at least one good piece of news on the horizon: the European Regulation on Crypto Asset Markets (MiCA) is expected to come into force at the end of the year. Even though it only expressively legislates stablecoins, it is the first step towards further legislation of crypto.
