Cryptocurrency is Gradually Becoming Popular, and Fraud Methods Are Upgraded
“Baby, look, this coin has been rising sharply recently. I followed the teacher’s advice and have already made several times my investment! You should try it too; I guarantee you’ll achieve financial freedom quickly.” On the screen, sweet talk accompanied by the constantly fluctuating cryptocurrency candlestick chart, this “online lover,” whom Xiaofang had just met not long ago, launched wave after wave of temptation.
Desiring love while wanting to increase her income, Xiaofang, under the enthusiastic guidance of the other party, gradually stepped into the meticulously laid trap of a “pig slaughtering plate.” From the initial small investments to later pouring in all her savings, Xiaofang watched the numbers in her account continuously climb, as if the dream of wealth was within reach. However, when she finally wanted to withdraw her profits, she discovered that everything was just an illusion; the numbers on the website disappeared like a mirage, leaving behind only endless regret and unbearable financial losses.
Xiaofang’s experience is not an isolated case. With the popularity of cryptocurrency, various types of fraud have become ubiquitous.
The Director of the Cyber Crime Prevention Center of the Criminal Investigation Bureau, Lin Jianlong, stated that according to police statistics, fraud cases in Taiwan peaked in August 2024, with financial losses in a single month reaching NT$13.8 billion, most of which were related to fake investments and friendship scams, showing a certain positive correlation with the rise and fall of cryptocurrencies.
Although there was a decline earlier this year, the overall fraud amount remains quite staggering, with numerous victims. On average, around 400 to 500 fraud cases occur each day. Lin Jianlong remarked, “In the past, being defrauded of a million NT dollars was considered a high amount, but now it’s not uncommon to see cases involving 10 million, 30 million, or even 100 million. This is indeed a serious issue.”
Current Situation of Cryptocurrency Crimes in Taiwan: Fake Investments and Friendship Scams Are the Most Common
“Door-to-door collection, door-to-door currency merchants are all scams!” Red banners with similar slogans can be seen almost everywhere in Taiwan, yet the number of daily victims remains high.
Lin Jianlong specifically pointed out several rampant types of cryptocurrency crimes in Taiwan. The most common method is through fake investments and fake friendships, where relationships are established first, and then victims are lured into purchasing cryptocurrencies with the promise of high returns. Additionally, scams involving fake job offers and fake loans not only defraud small amounts of money but often turn victims’ accounts into money laundering fronts.
Akabr Akhtar, head of Binance’s Asia-Pacific investigation department, also noted that issues related to cryptocurrency fraud and money laundering are not unique to Taiwan; each country faces different situations. Among them, “rug pulls,” “pig slaughtering plates,” and romance scams are currently common hybrid fraud methods.
Akabr stated that many perpetrators in these fraud cases come from overseas, as they believe this allows them to evade investigations under international jurisdiction. Because of this, each country tends to attract criminal activities, and these criminals tailor different fraud strategies based on the weaknesses of each country. “This is not only happening in Asia but also in Europe, the Middle East, Africa (EMEA), and the Americas.”
Challenges in Investigating Cryptocurrency-Related Cases
As technology continuously advances, the methods employed by fraud groups have also “upgraded.” From being limited to traditional financial domains, they have now cleverly integrated blockchain and cryptocurrency technologies, making the methods of fraud and money laundering more diverse and difficult to prevent.
This not only makes it challenging for victims to discern authenticity but also poses unprecedented challenges for law enforcement in case investigations.
Challenge 1: New Technologies and Concepts like Blockchain
Cryptocurrency is a completely new field for many law enforcement personnel, requiring them to learn from scratch about concepts such as blockchain technology, wallet addresses, and transaction tracking. Additionally, criminal groups may use mixers and cross-chain tools to increase the difficulty of tracking, making it harder to trace money flows on-chain compared to traditional finance.
Confronted with new types of fraud techniques brought about by blockchain technology, Lin Jianlong stated, “For many investigators, they do not know what blockchain is, nor do they understand why a transaction goes to that address and then transfers through multiple layers… these are things they are completely unaware of. Because previously it was only traditional finance, but now with the development of blockchain, cryptocurrency has emerged, and people who understand the information field are more capable of handling it.”
Since cryptocurrency-related cases have become increasingly severe over the past three years, Lin Jianlong mentioned that in the year 112 of the Republic of China (2023), the Criminal Bureau started training about 80 personnel who understand coin flow analysis. Last year, more than 500 personnel across police stations in various counties and cities in Taiwan were trained to conduct cryptocurrency analysis, all to address these technical issues.
Challenge 2: Complex On-Chain Money Flow Tracking
When investigating cryptocurrency fraud cases, tracking on-chain funds can also become a significant challenge.
Lin Jianlong observed that the methods of fraud groups are constantly evolving. In the past, they utilized traditional finance to create breaks in money flow using ATMs and stored large amounts of cash at home. Now, they transfer the funds defrauded from exchanges to multiple non-custodial wallets, which he refers to as “on-chain insurance vault wallets,” primarily using the stablecoin USDT.
Challenge 3: Transnational Nature of Crimes in the Cryptocurrency Sphere
If fraud groups use stablecoins or centralized exchanges for fiat currency deposits and withdrawals, the police can contact stablecoin issuers or exchanges to assist in freezing funds or accounts, preventing fraud groups from making further transfers or withdrawals.
However, when funds are transferred to foreign exchanges, they often face situations where they “cannot find anyone” or the exchange is unwilling to cooperate. “For example, there are exchanges in Cambodia where fraud groups often launder money, and they obviously would not be willing to cooperate with us,” Lin Jianlong expressed helplessly.
Cooperation between Exchanges and Police
As cryptocurrency crimes become increasingly rampant, cryptocurrency exchanges, which are at the core of digital asset flow, play an exceptionally important role. Exchanges are not only the primary platforms for users to buy and sell but can also serve as channels for criminals to launder money and transfer stolen funds. Given their access to a large amount of user information and transaction data, exchanges have become key partners for law enforcement in combating cryptocurrency crimes.
Currently, when Taiwanese police investigate international cryptocurrency crime cases, they engage in the following main forms of cooperation with exchanges:
Data Requests
This is the most common form of cooperation. When Taiwanese police suspect that a particular international cryptocurrency crime case is related to users of a specific exchange, they will issue a formal legal request to that exchange, asking for KYC (Know Your Customer) information related to the account, including user identity and contact details. This helps police trace the source and destination of the funds and identify the suspects.
Asset Freezing
When the police have sufficient evidence and suspect that a particular exchange account or wallet is related to criminal activities, they will request the exchange to freeze the assets in that account or wallet to prevent criminals from transferring or withdrawing funds.
Lin Jianlong stated that currently, in addition to Taiwanese operators, international exchanges like Binance and OKX have also cooperated in freezing assets. For instance, in recent cases such as the Creative Private Case and the “Taiwan Version of the Cambodia Case,” Binance actively collaborated with law enforcement agencies to freeze and transfer illicit assets.
Intelligence Sharing and Analytical Assistance
Exchanges typically possess rich trading data and risk control systems capable of identifying suspicious trading patterns and account activities. Taiwanese police may share case information with exchanges and request their assistance in analyzing data to identify potential criminal leads or accomplices. Akabr also mentioned that Binance proactively analyzes suspicious behavior and shares findings with law enforcement.
Training and Knowledge Exchange
Many domestic and international exchanges provide law enforcement with training on cryptocurrency and blockchain technology, helping police enhance their investigative capabilities. This exchange of knowledge helps the police better understand how cryptocurrency crimes operate and cooperate more effectively with exchanges.
Speaking of Binance’s cooperation with law enforcement agencies, Akabr noted that last year (2024), Binance responded to nearly 65,000 law enforcement requests globally, including more than 2,000 requests from Taiwan, reflecting the proactivity of Taiwanese law enforcement personnel in case investigations.
Law enforcement requests do not equate to the actual number of criminal cases or actual damages, but they can reflect the “relative” level of proactivity of law enforcement personnel. For instance, if Country A submits more law enforcement requests than Country B, it does not mean Country A has more cases. In reality, Country B may have a higher crime rate than Country A, but due to different reasons (such as insufficient personnel), it may not be able to allocate resources for case investigations.
Additionally, Binance has been actively collaborating with law enforcement agencies worldwide in recent years, responding not only to data inquiries, asset freezes, and confiscation requests from law enforcement but also proactively providing training in cryptocurrency investigations, including in Taiwan.
Akabr Akhtar, head of Binance’s Asia-Pacific investigation department (far right)
Lin Jianlong also believes that such international exchange opportunities are quite precious for Taiwan. “I always tell my colleagues, you may not necessarily learn new techniques, but you can understand what others are doing, and most importantly, establish future cooperation relationships and channels.”
In the future, as the popularity of cryptocurrency increases, the number of crimes may also rise. However, Akabr emphasized that the industry, law enforcement, and regulatory agencies are all working hard to curb this trend.
Moreover, Taiwan’s regulatory efforts regarding cryptocurrency are gradually strengthening. From initially being included in anti-money laundering regulations to later implementing a registration system, the next step will be to move towards a licensing system. Under a clearer licensing framework in the future, this collaborative effort between the public and private sectors is expected to deepen, jointly addressing the increasingly complex challenges of cryptocurrency crime and fostering a healthier environment for cryptocurrency industry development.