Mahesh, 39, a businessman from Hyderabad, was recently cheated out of 80 lakh by scammers who allegedly operated a fake cryptocurrency exchange. He claimed that between December 2021 and April 2022, he invested Rs 80 lakh in a crypto exchange whose URL ended with an ‘.ac.sh’ extension.
Mahesh has since filed a complaint with the Cybercrime Unit. Mahesh told police that he learned about the crypto exchange through a friend. The police have now filed a complaint under sections 66-C and 66-D of the Information Technology Act and 419 and 420 of the Indian Penal Code against unidentified fraudsters for operating the fake exchange.
By the way, this is not the first incident where people have been misled with such tactics.
A 2022 Crypto Crime Report from Chainalysis, a Singapore-based blockchain data platform, said cryptocurrency-based crime hit a new high in 2021, with illegal addresses receiving $14 billion over the year, compared to $7.8 billion in 2020. .
To understand the technological flaw and how cyber authorities are dealing with these crimes, Outlook Money reached out to some senior law enforcement officers investigating these crimes, as well as technology experts to better understand how investors can protect themselves.
What technical error leads to such crimes?
Sandeep Shukla, professor of computer science and engineering at IIT-Kanpur and co-director of the National Blockchain Project, explained that there are basically two types of crimes.
In the first type of crime, a cryptographic protocol is deployed by honest accounts to create an application, but malicious attackers gain access to it by finding a security flaw in the protocol or smart contract and then executing a transaction or series of transactions. the protocol. Examples include the Decentralized Autonomous Organization (DAO) attack on Ethereum and many other recent attacks on De-Fi protocols.
Another type of crime is based on the cover of pseudo-anonymity that public Blockchain platforms provide. Here, people engage in activities under the guise of anonymity such as scams, phishing, gambling, money laundering, NFT scams, etc.
“With modern crypto-forensic tools, we can sometimes break pseudo-anonymity, but if they use VPN/TOR etc, and also use fake KYC on exchanges, or if they use exchanges outside of jurisdiction, they can get away with it,” explains the professor out. Chokla.
Gaurav Mehta, founder of Catax, a crypto valuation, auditing and forensics start-up, also pointed out that most crimes occur when individuals manage their own private keys that are susceptible to hacking and termination, with individuals being encouraged to make their private keys public. keys in one form or another with different schemes that promise quick returns.
However, it warns against installing pirated software, unauthenticated apps, and browser extensions.
Challenges Cyber Authorities Face in Resolving Cybercrime
Triveni Singh, Chief Inspector of Police, Cybercrime at the Uttar Pradesh Police Department, told Outlook Money that tracking is one of the biggest challenges in crypto-related crime.
“Every time there is a crime and we ask for data, they can’t show it. But in order to detect such cases, we now get help from some companies that provide us with tools to detect them. I can’t share the company name, but these tools help us know how transactions are going. Based on this, we use open source intelligence to detect such cases,” he says.
A report from Chainalysis noted that Indian users visited crypto scam websites over 9.6 million times in 2021 alone. The most visited scam websites in India are coinpayu.com, adbtc.top, hackertyper.net, duamine.com and coingain.app. These five websites alone received about 4.6 million visits from Indian users.
Ankush Mishra, ACP, who is investigating money laundering, crypto and cybercrime for the Uttarakhand Police Department, pointed out that one of the challenges for them in cryptocrime was that several criminals had set up groups of WhatsApp where they had their own employees as administrators.
“These criminals use these groups as a net and try to present their shady investment schemes through which they try to influence ordinary people to invest in such investments,” he says.
He further noted that another challenge they faced was that while these exchanges have expanded their operations, at the same time they don’t know anything about the wallets where the money comes in.
The two senior police officers asked people not to believe scammers, posts and social media posts promising high investment returns.
How can investors be careful?
Professor Shukla asked people not to invest in crypto investments because the whole scenario (of crypto investments) resembles a Ponzi scheme – which is based on speculation and manipulation by crypto owners.
“The fact that it’s so complex for regulators or law enforcement to do a lot right now is that it’s best to avoid crypto as an investment vehicle, especially as a long-term investment,” he said.
Divakar Prayaga, SVP and Chief Information Security Officer, CoinDCX advises investors not to click on phishing links received via email/SMS and not to download untrusted software or malicious files from the Internet that may contain malware.
Aritra Sarkhel, director of WazirX, a crypto exchange, shares some points for staying more cautious.
Explore what communities are saying about crypto and founders on Telegram and Reddit groups/forums.
Check the resilience of crypto on exchanges in major dips.
Resist the fear of missing out (FOMO). Just because a crypto is trending, don’t just jump in and invest in it.
Don’t trust random “influencers” on You Tube/Instagram for certain cryptos. Research first, buy later.
You don’t need to buy all cryptocurrencies. You can buy fractions of a crypto. It is like a split investment in stocks in the US market.
Understand taxation depending on the country you are in.