Chile Joins the “FakeCoin” Campaign to Combat Crypto Scams

• The campaign implemented by several Latin American and European countries aims to prevent users of the crypto market from being easy prey for cybercriminals.
• Cryptocurrency scams have increased around the world and Chile is not immune to this global risk as the use of digital money grows.
• At least six types of scams are used by cybercriminals to take advantage of their victims.

The rapid adoption of cryptocurrencies in South America in recent years has been accompanied by the rise of cybercrime in Chile. The Investigative Police (PDI) registered 79 cases related to this type of crime last year, of which 53% correspond to fraud with digital currencies.

Cryptocurrencies are being used as safe-haven assets against inflation, investment instruments, and exchange currency. For many unbanked people or recipients of foreign remittances, they offer relief because they make transactions cheaper and faster.

As their trade has grown, the authorities have also detected the proliferation of fake companies that employ various tricks to dupe unsuspecting investors and users.

Research from blockchain data platform Chainalysis found that cryptocurrency-related fraud and theft rose 81% globally in 2021. Some of the most notorious cases occurred in Latin America.

Exponential Growth of Cybercrime

Cryptocurrency crimes totaled $14 billion, nearly double what was recorded in 2020, when losses from these crimes totaled about $7.8 billion.

The lack of regulation in Chile and other countries has facilitated crypto thefts and scams. However, the Chilean police and prosecutor’s office joined their peers in 17 other Latin American and European countries to launch the “FakeCoins: cryptocurrency scams” campaign.

This campaign seeks to alert users of cryptocurrencies about the risks involved in trading these assets if proper precautions are not taken.

"It was determined that this was one of the more or less recent emerging crimes that is on the rise, so the decision was made to create a network of police specialized in the fight against Cybercrime in Latin America and the European Union to work on this matter," Deputy Prefect Luis Orellana, head of the Police's Metropolitan Cybercrime Investigative Brigade, told El Mercurio. Orellana reported that one of the main problems detected is people’s lack of knowledge about the use and operation of cryptocurrencies.

"Then, we consider as a network to make a campaign preventing the illicit use of cryptocurrencies, that is, explaining that there are modalities, some type of knowledge that prevents them from being victims of a crime," he said. Thefts and frauds with crypto assets “are repeated in the 17 countries and in the same modalities,” he said. In this sense, he explained that the first phase of the campaign will focus on education and prevention activities to prevent people from being victims of these crimes.

Main Forms of Scam

“FakeCoins” has identified at least six main methods used by cybercriminals to defraud users. One is WebCoin, or the use of fake web pages, where cryptocurrency buying and selling services are offered.

The other is AppCoin, which uses fake accounts in well-known applications to impersonate profiles of exchanges and other cryptocurrency companies. The objective of these fraudulent applications that simulate investment portfolios is to obtain the bank details of the victims.

Likewise, there is the LoverCoin, a kind of Romeo that catches victims by making them fall in love through social networks or on the street. After seducing the victim, the person proposes to invest in Bitcoin or other cryptocurrencies.

There is also the CelebriCoin that is usually advertised on social networks using the image of a famous person (actor/actress, athlete, singer) so that the victim registers in a fraudulent network or gives their bank details.

Another modality is the MailCoin that appears in the email inbox. They are spam messages asking to renew passwords, offering investments with high and fast returns and rewards for recommending someone you know.

Finally, there are the PiramiCoin or classic Ponzi schemes that offer juicy profits and good rewards for adding more players to the network. This has been one of the most used modalities to scam people.

According to Orellana, several of these forms of electronic fraud are related. "There is the WebCoin, which is a fake page, but also through the CelebriCoin, which is the subject of use by celebrities, many times they refer you to a fake page."

Why You Should Care

• For the cybercrime expert, the problem is not in cryptocurrencies themselves, but in the ignorance that many people have about the crypto market.

"We are not criminalizing cryptocurrencies, we are not saying that they are bad to buy. What we are saying is that if you are going to invest, make sure you invest calmly," he clarified.

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