British Columbia’s financial markets regulator is sharing the results of a recent, two-day, multijurisdictional effort to contact and warn victims of cryptocurrency fraud.
Dubbed “Operation Avalanche,” the project brought together securities regulators from Alberta, Quebec and Ontario, as well as investigators from the Delta and Vancouver police departments, the RCMP and the U.S. Secret Service on March 11 and 12 in Vancouver.
The authorities worked together with several crypto trading platforms and Chainalysis, a blockchain transactions analytics firm, to find compromised wallets on the Ethereum blockchain, identify their owners and warn those owners to take steps to prevent further losses.
Investigators contacted 89 victims by phone or by email, the B.C. Securities Commission said in a news release Wednesday, adding that these interactions with victims gave regulators and law enforcement information that could help with future efforts to investigate and disrupt online investment fraud.
“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, the BCSC’s deputy director of enforcement, in the release.
“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.”
Led by the BCSC, Operation Avalanche focused specifically on a technique known as “approval phishing,” in which fraudsters trick victims into granting access to a wallet on the Ethereum blockchain.
“The Ethereum blockchain shows which wallets have granted such permission,” the regulator explained.
“Although there can be legitimate reasons to grant access to a wallet, most of the time it’s part of a long-term online investment fraud, often referred to as ‘pig butchering.’ The blockchain addresses identified during the operation were drained of crypto assets worth an estimated $4.3 million.”
Chainalysis traced the origins of cryptocurrencies in compromised wallets and – if they came from one of the crypto platforms participating in the operation – regulators contacted the platform to get the user’s contact information.
Participating crypto trading platforms included Netcoins Inc., Ndax Canada Inc., Coinbase Canada Inc., Wealthsimple Investments Inc. and Shakepay Inc., according to the BCSC. All of those platforms are registered to operate in Canada.
Kraken and Coinsquare also provided information to authorities as part of Operation Avalanche, the BCSC said.
“BCSC investigators plan to use the techniques they developed in Operation Avalanche to make this proactive alerting of victims a regular part of their fight against online investment fraud,” the regulator said in its release.
More information about crypto investment fraud, how to avoid falling victim to it and what to do if you’ve already been victimized can be found on the BCSC website.
