'Tech Against Scams': Crypto Exchanges and Tech Giants Join Forces to Battle Scams

Coinbase, in partnership with Kraken, Gemini, Ripple Labs, Meta, the Global Anti-Scam Organization (GASO), and dating app company Match have launched the "Tech Against Scams" initiative to combat prevalent scams in the industry.

This educational and safety initiative targets widespread fraud, particularly romance scams, by informing the public about various fraudulent schemes and providing best practices for avoiding victimisation.

On its blog, Coinbase announced that:

“Coinbase has launched the Tech Against Scams coalition with industry leaders like Match Group, Meta, Kraken, Ripple, Gemini, and GASO to combat online fraud and financial schemes. This partnership aims to protect and educate users, emphasizing that scams are a tech-wide issue, not limited to social media, crypto, or finance. By sharing knowledge and best practices, we strive to create a safer digital environment. Stay vigilant against scams by avoiding unsolicited investment advice, using reputable platforms, and educating yourself on fraud tactics. Together, we can safeguard our community and the promise of increasing global economic freedom."

The coalition underscores the need for a unified effort to tackle scams that have become rampant across different platforms and industries.

By combining their resources and expertise, these companies aim to create a safer digital environment and enhance consumer protection against rapidly evolving scams.

Coinbase said:

“Scams are not limited to social media, cryptocurrency, finance, or dating apps; they are a widespread issue across the tech landscape. Through this coalition, we aim to share insights, knowledge, and best practices to protect users and prevent scammers from exploiting them.”

The Tech Against Scams coalition will focus on several critical areas, including the exchange of threat intelligence, the development of best practices, and consumer education.

Coalition members will collaborate by sharing information on scam tactics and the tools used by fraudsters, continually refining strategies to counteract these schemes.

A significant emphasis will be placed on educating users to recognise and avoid scams, ultimately safeguarding them from falling victim to fraud.

Origin of 'Tech Against Scams'

Starting last summer, Match Group, Coinbase, and Meta embarked on a pioneering collaboration within the tech industry to address cross-platform threats, including "pig butchering" scams.

Recognising the potential for greater impact, they invited additional companies to join the conversation.

This cross-industry alliance now includes online, social media, and crypto companies, each leveraging their unique positions within the ecosystem.

The goal is to better identify emerging adversarial trends, share best practices for combating global scams, and drive collective action to protect users.

Pig-Butchering Scams Becoming Increasingly Prevalent

Coinbase highlighted "pig butchering" scams as a specific scheme the coalition aims to combat.

These romance scams have become increasingly prevalent, with fraudsters using fake identities to build relationships with potential victims through text messages, social media platforms, or dating apps.

Guy Rosen, Chief Information Security Officer at Meta, said:

"Scammers and the organised criminal groups behind pig butchering schemes target people across many internet services, making it hard for any one company to see the full picture of malicious activity and counting on each of us working in silos."

Once trust is established, scammers introduce the idea of crypto investments and eventually persuade victims to transfer funds to accounts under their control.

Devraj Varadhan, EVP of Engineering at Ripple, expressed:

"As scams continue to become more convincing and intricate, bad actors are taking every opportunity to target and defraud innocent victims."

The term "pig butchering" refers to the gradual, systematic exploitation of victims, where scammers spend considerable time building rapport to "fatten" them up before stealing their money.

These scams often start with romance to build trust, but sometimes scammers approach victims with false promises of business opportunities.

Coinbase emphasized that such scams are not unique to the crypto industry or digital technology, having existed long before either was invented.

In response to these threats, Tech Against Scams aims to dismantle the tools and methods employed by fraudsters, significantly hindering their ability to operate effectively.

This strategic initiative seeks to create a more secure environment by proactively disrupting the infrastructure that scammers rely on.

Philip Martin, Chief Security Officer at Coinbase, said:

“Fraud schemes are becoming increasingly sophisticated, underscoring a greater emphasis on the importance of industry leaders coming together to tackle fraud and secure a safer digital environment for users. We are dedicated to disrupting emerging online scams through collaboration, information sharing, and enhanced consumer education."

Yoel Roth, VP, Trust & Safety at Match Group, added:

"Tech companies across industries collaborating with each other is essential for preventing criminal activity, and ultimately helps online platforms stay ahead of, and develop effective solutions for, various types of financial crimes."

A Staggering $1.4 Trillion Lost to Financial Scams Annually

While only 0.34% of blockchain transactions are used for illicit purposes, and cash remains the preferred medium for such activities, the impact on victims of crypto-related scams can be devastating.

Despite illicit activity accounting for less than 0.5% of all crypto transactions, the consequences are often life-changing.

Financial scams cost consumers worldwide an estimated $1.4 trillion annually.

Since 2020, the occurrence of romance scams has surged by 85 times, signalling a troubling rise in both frequency and intensity.

The most recent Crypto Crime Report by Chainalysis disclosed that approximately $24.2 billion was pilfered through cryptocurrency-related scams in 2023.

Source: Chainalysis 2024 Crypto Crime Report

The FBI's 2022 IC3 Report revealed that Americans reported losses exceeding $700 million to romance scams involving both cryptocurrency and traditional currency.

Additionally, losses totalling nearly $2.5 billion were reported in connection with various types of cryptocurrency investment scams, irrespective of any romantic involvement.

These figures do not encompass victims from other nations, such as China, where residents are also prime targets of such fraudulent schemes.

The exchange said:

“While Coinbase maintains a robust compliance program, no platform is immune to scams. It’s crucial for users to be vigilant and informed. By educating consumers and sharing resources, we can help prevent scams before they occur.”

Coinbase recommends several precautions for consumers, including downloading apps only from trusted sources, safeguarding assets by refraining from transactions with unfamiliar individuals, seeking advice from trusted contacts regarding investments, and utilising reputable crypto wallets and exchanges.

It is crucial for individuals to stay informed about the latest scam tactics.

The coalition aims to cultivate a secure and equitable financial environment, thereby upholding the potential for expanding global economic freedom.

In its blog post, Coinbase advised accordingly:

“Consider all the platforms you use daily—messaging apps, social media, dating sites, and e-commerce marketplaces. These are all potential channels for scammers to make initial contact. Scammers are adept at building trust and making their targets feel comfortable. While targeted individuals may believe they are communicating with one person, there is often an organized team of scammers behind the scenes tricking people on an industrial scale.”

Pig-Butchering Scams Run Rampant

Less than a week ago, the United States (US) Department of Justice (DOJ) has pressed charges against two Chinese nationals for their alleged involvement in a sophisticated crypto scam known as the "pig butchering" scheme, alongside laundering millions of dollars.

According to a press statement by the DOJ, Daren Li and Yicheng Zhang, both Chinese citizens, are accused of orchestrating the pig butchering scam.

This elaborate scheme involved initiating unsolicited communications with individuals to establish trust before introducing them to deceptive crypto "investment opportunities."

Exploiting promises of lucrative returns, the perpetrators persuaded victims to open bank accounts under fictitious company names and deposit funds into them.

These funds were subsequently routed to a Bahamian bank and converted into USDT, the largest stablecoin in circulation.

US Attorney Martin Estrada elaborated:

“Sophisticated financial scams such as these are a dangerous threat to the financial well-being of all Americans. While my office will continue to root out and punish these deceitful schemes, I encourage everyone to educate themselves on pig butchering and other kinds of financial fraud to protect their families against such predatory activity. Vigilance is key.”

Prosecutors allege that Li and Zhang laundered a staggering $73 million, with their associated crypto wallet receiving over $340 million worth of digital assets.

Facing charges of conspiracy to commit money laundering and six counts of international money laundering, the duo could potentially serve up to 20 years in prison for each count.

Then in April, US tech behemoth Google initiated a lawsuit against two Chinese developers in a New York federal court, alleging their involvement in defrauding approximately 100,000 individuals via counterfeit cryptocurrency investment applications hosted on the company's Play Store platform.

According to the lawsuit filed by Google, Yunfeng Sun based in Shenzhen and Hongnam Cheung in Hong Kong orchestrated a sophisticated "pig-butchering" scam since 2019.

This scam entailed the deployment of 87 fraudulent apps masquerading as legitimate cryptocurrency exchanges and investment platforms on the Play Store, targeting unsuspecting users in the US and Canada.

The perpetrators' modus operandi involved cultivating relationships with victims, either through friendship or romance, and subsequently coaxing them into making investments via the fraudulent apps they managed, as outlined in the lawsuit.

Another striking example is the well-known KK Park in Myanmar, which has gained notoriety as a hub for "pig butchering" scams.

This facility has been associated with over $100 million in stolen funds, exploiting families by demanding cryptocurrency ransoms for the release of trafficked individuals.

Shockingly, it is estimated that around 2,000 trafficked workers are currently held captive there.

What 'Tech Against Scams' Plan to Do Moving Forward

This emerging coalition capitalises on the collective efforts and investments made by these companies over the years to safeguard their users against scams, fraud, and various security threats.

Brian Bruce, Chief of Operations at Global Anti-Scam Organisation, noted:

"People around the world lose hundreds of millions of dollars every month. Criminals are constantly adapting by leveraging and adopting new technology to scam on a global and massive scale. As a result, we strongly believe that a multi-sector response with tech and financial companies is necessary to fight against this major transnational issue."

Moving forward, the coalition will spearhead the development of new initiatives to pinpoint best practices and shape collaborative efforts aimed at curbing these scams.

Yoel Roth, VP, Trust & Safety at Match Group, said:

"As we work to make it harder for scammers to defraud people, we will also continue investing in new technologies to help disrupt fraud and scams faster, and get people the support and resources they need."

Additionally, the group is dedicated to enhancing consumer protection by furnishing users with the necessary tools and information.

Devraj Varadhan, EVP of Engineering at Ripple, iterated:

"We must fight back and educate individuals on how to protect themselves from these predators. There is no place for scammers, and we must come together across industries to address this pressing issue."

Moreover, they pledge to maintain close collaboration with law enforcement agencies globally, facilitating information sharing to bolster investigations combating online fraud and criminal activities.

Guy Rosen, Chief Information Security Officer at Meta, expressed:

"We hope that this coalition will serve as a force multiplier for security teams at tech companies to share threat insights and trends to enable more impactful disruptions of scam networks around the world."

Pig-Butchering Scams are a Perpetual Black Hole

Romance scams, often referred to as pig-butchering scams, represent a particularly insidious form of fraud due to their emotional manipulation tactics.

These scams prey on individuals' vulnerabilities and desires for companionship, making them exceptionally difficult to resist.

Despite efforts to educate and raise awareness about these scams, their allure persists, highlighting the profound impact they can have on victims.

Pig-butchering scams act as a metaphorical black hole, drawing victims into a never-ending cycle of deception and financial loss.

This perpetuates the notion that romance scams are among the most dangerous scams, as they not only result in significant financial harm but also inflict emotional trauma that can be long-lasting and devastating.