The huge sums of money lost to crypto scams and frauds is probably the biggest financial looting in the history of the USA.
The FBI recorded losses over $12.5 billion in 2023, 22% more than the previous year. The agency’s Internet Crime Center received a record 880,418 complaints from Americans about potential crypto and online thefts. Considering that most of the targeted individuals do not report their cases to law enforcement, these statistics imply an even more chilling reality.
We need collective action to resolve this situation, from robust security solutions to innovative regulatory and policy frameworks. It’s the only way out — and many already affected are on borrowed time.
We call upon community leaders, politicians and policymakers to step up and protect vulnerable communities. The present circumstances necessitate proactive and enduring measures from them. This is a battle between good and evil, where regulators and crypto innovators should be allies, not adversaries.
Whether one likes it or not, crypto is here to stay: but it cannot persist in its current form. We must prioritize accountability and transparency to enable this groundbreaking technology to thrive and ensure that more people prosper in a secure financial landscape.
Let’s make crime illegal again.
Strategic interventions are mission-critical
Washington DC must urgently take decisive action to protect consumers from the rampant frauds plaguing the crypto realm.
With another bull cycle underway, the influx of new users and capital only heightens the risk.
The US, the biggest financial superpower, is in dire need of a robust and unambiguous regulatory framework to effectively combat crypto-related crimes. The current lack thereof has left investors, traders and consumers vulnerable to significant risks. The fragmented oversight by agencies like the SEC, CFTC and IRS has created loopholes ripe for exploitation by hackers. Enforcing anti-money laundering laws in this chaotic landscape is an uphill battle.
Read more from our opinion section: Petty legislation is crypto’s greatest enemy
In addition to comprehensive policies, legislators must establish rigorous reporting and examination standards for both enforcement agencies and crypto businesses. This will enable stakeholders to swiftly identify and thwart illicit activities, providing real-time protection to potential victims.
Prevention must take precedence over reaction. Implementing deterrent measures that render attacks economically futile is imperative. Furthermore, equipping local enforcement agencies and security personnel with adequate training and education is crucial in effectively combating crypto crimes, both proactively and reactively.
By laying down the groundwork, legislators will pave the way for innovators and entrepreneurs to develop solutions that address security concerns at both protocol and user levels. With the technological landscape evolving rapidly, it’s paramount to instill confidence in the crypto ecosystem.
From cryptocurrencies to Ponzi schemes
Technology is inherently neutral; its morality is determined by its application in a specific context, just as with atomic reactors and quantum computers.
According to the Pew Research Center, more than 43% of crypto investors expressed doubts about security in the crypto industry in 2023. This statistic underscores the urgent need for legislative intervention. The devastating consequences of losing fortunes to hacks and scams affect individuals from all walks of life, including fathers, single mothers, college students, older adults and practically anyone involved in cryptocurrency investment.
Data from the FBI indicates that consumers suffered losses exceeding $29 billion between 2021 and 2023. Unfortunately, many of these incidents went unreported due to insufficient infrastructure, societal stigma and a lack of confidence in the effectiveness of retributive measures.
The escalating utilization of cryptocurrencies in various illicit activities such as financial crimes, money laundering, trafficking and terrorist financing adds another layer of complexity to the situation.
Malicious actors leverage highly sophisticated technologies and methodologies, often staying two steps ahead of law enforcement. Tracing their actions and holding them accountable has become exceedingly challenging, demanding specialized skills and resources.
Since 2017, North Korean hacker groups, for example, have stolen tokens worth $3 billion, according to the UN Security Council’s estimates. North Korea was possibly involved in 17 crypto-related thefts and hacks in 2023 alone, draining over $750 million — roughly 50% of the nation’s foreign currency earnings.
Beyond North Korea, Iranian and Russian groups have also extensively used private crypto-assets to launder stolen funds, purchase illegal weapons, evade sanctions and so on.
Every month, thousands of new Ponzi trading platforms also surface, targeting individuals through platforms like Twitter, Facebook groups and TikTok. They entice people from social media into a trap, often starting with a seemingly harmless interaction that transitions to a communication platform like WhatsApp.
Once engaged, the scam begins, manipulating victims through various senses and emotions. What starts as a small investment can swiftly escalate, potentially devouring entire savings like a 401K in a matter of weeks. Victims are relentlessly pushed to invest more, with cryptocurrencies often used as an anonymous conduit, exacerbating the complexity and severity of the scam.
Law enforcement will issue a report on the case, but by the time they come to any sort of conclusion, the wallet will have long been emptied.
Crafting new policy frameworks for emerging challenges
Cryptocurrencies present unique challenges. Outdated one-size-fits-all approaches are inadequate for enhancing security and protecting users in this rapidly evolving industry.
Mere compliance is insufficient. Regulators must also uphold market integrity, demand that cryptocurrency exchanges and wallet providers enhance protections for investors’ capital, inspire confidence among investors, foster innovation through awareness and safeguard the entire ecosystem. Balancing security and innovation is paramount. Overemphasizing either aspect risks undermining progress.
Despite the challenges, the US as a regulatory leader possesses the capacity to navigate this landscape effectively.
American households urge Congress to act swiftly and decisively to address the crisis by implementing strict regulations for cryptocurrencies. Entrepreneurs are ready to help.
If we can’t help protect people’s finances in 2024, what does that mean for the future of our financial systems?
Bezalel Eithan Raviv, an ex-member of IDF Cyber Unit 8200, is a seasoned entrepreneur with deep expertise in technology and innovation. He now leads Lionsgate Network, a blockchain analysis firm specializing in professional money recovery services for digital asset investors in the +$2.5 trillion market. Prior to this role, Bezalel founded an investment banking firm supporting AI startups and developed Halleluiah, a pioneering web3 migration pattern for global music copyrights.
