Updated on December 5, 2024:
Blockchain financial crime chief investigator Chen Meihui made outstanding contributions in the past year to blockchain fraud prevention, anti-fraud efforts, and wrongful case rescues. Unfortunately, she passed away in a car accident on December 4th, in the early hours of the morning.
Chen Meihui’s company, Chain Science, released an official statement saying, “We deeply mourn the loss of an important colleague in a major traffic accident. Miffy’s expertise was in blockchain fund flow analysis, and she had been collaborating with law enforcement agencies on various cases. She was a person of great integrity and enthusiasm. Losing her is a loss not only to her family, friends, and company, but also to the entire industry. The case is currently under investigation, and we should not and will not speculate too much.”
Are there really so many blockchain scams?
Engineer Mr. Chen met a netizen on a legitimate dating platform, and they hit it off and got along well. After several weeks of chatting and building trust, the new friend revealed that besides working, they also engaged in investments and received stable and substantial returns.
As a cryptocurrency novice, Mr. Chen, with the recommendation of his new friend, downloaded a WEB3 wallet. Adhering to the principle of “don’t trust netizens,” he initially only dared to invest a small amount of a few thousand yuan. After a few days, he did receive interest in his account, and after testing, he found that the cryptocurrency in the wallet could be transferred in and out normally. Mr. Chen gradually let go of his guard and started increasing the amount of his investments.
Shortly after, the website launched a limited-time promotional activity, and Mr. Chen authorized the wallet to link and increased his investment. However, he soon discovered that a large amount of money had disappeared from his wallet, and the promised high returns did not materialize. The customer service said that this was because Mr. Chen did not meet the requirements of the promotion, resulting in his assets being frozen, and he needed to invest another amount to unlock them. At this point, he realized that he had fallen into a fraud trap and had already lost millions of New Taiwan dollars…
With the popularity of cryptocurrency and blockchain technology, fraud cases in Taiwan have been rapidly increasing. According to recent statistics from the Taiwan Ministry of the Interior’s Police Administration, there were 37,823 fraud cases in 2023, and 11,405 of them were related to cryptocurrencies. Such cryptocurrency scams are not only large in scale but also becoming more sophisticated, posing significant challenges to law enforcement agencies and the general public.
However, XREX blockchain financial crime investigator Chen Meihui believes that the number of scams in Taiwan is likely to be more than three times the current statistics.
Blockchain scams are increasing, and both beginners and experienced individuals can be deceived!
Many people may think that the story of engineer Mr. Chen mentioned above is foolish. Statements like “you won’t be deceived as long as you are careful,” “only beginners will be deceived,” and “low-interest rates mean safety” are common misconceptions. In addition, fraud groups have different scripts and methods for targeting beginners and experienced individuals, so even if users are cautious, they may still fall into fraud traps.
“The advertising slogan ‘Earn 20% annual interest easily’ is clearly a scam, and advanced fraud schemes would not use it,” said Chen Meihui. “This belongs to a lower-end fraud.”
This is because engineers and middle-class users with more assets generally expect stable and conservative investment projects. People who initially want to earn 20% are likely to have less money in their pockets, making it harder for fraud groups to exploit them. Particularly, fraud targeting the middle class and mid-level players in the cryptocurrency industry can be quite difficult to prevent. Chen Meihui opened a blockchain browser while searching for victims’ wallet addresses and said, “Many engineers or users start with high vigilance.”
Chen Meihui clicked on the wallet transaction records of several victims and found that the history of transfer and deposit transactions was surprisingly similar: Fraudsters would first give victims a sum of cryptocurrency as bait while demonstrating the platform’s security. Then they would guide the victims to download a specific wallet application and ask for a fee (gas fee) to complete the registration. Next, they would lead the victims to link the wallet and transfer a large sum of money to an address controlled by the fraudsters. However, at the moment of linking the wallet, once users signed a smart contract, they unknowingly handed over the permission of “stablecoin USDT” in the wallet to the fraud group.
From the chain’s records, it can be observed that the initial amounts transferred by the victims were not large, and there were also multiple withdrawals and wallet security tests during the period. However, fraud groups remained patient and continued to deposit high returns into the wallet, gradually causing victims to let their guard down and transfer large assets into the wallet. When victims realized that something was wrong, the fraud group (customer service) would temporarily appease them and then use excuses like “add money to unlock collateral” or “pay to expedite the process” to squeeze out the last bit of savings from the victims.
What should you do when you discover you’ve been scammed?
According to police statistics, there were over 10,000 cryptocurrency-related fraud cases in Taiwan in 2023, but this is just the tip of the iceberg. Chen Meihui revealed that the actual number is likely to be more than three times higher on the surface because there are too many unreported victims.
Chen Meihui stated that the anonymity of cryptocurrency leads many people to believe that even if they report the case, they cannot recover their losses. Additionally, many victims are afraid of being stigmatized or feel ashamed, so they are unwilling to report the crime. This psychological barrier makes it difficult for many fraud cases to come to light and increases the difficulty of law enforcement.
4 steps to take after being scammed
Faced with cryptocurrency fraud and significant financial losses, most people may not know what they can do or which organization to seek assistance from. Chen Meihui suggests, “If you discover that you have been scammed, organize your financial loss records and make a police report.”
Victims can take the following steps:
1. Contact the 165 Anti-Fraud Consultation Hotline of the Ministry of the Interior’s Police Administration.
2. Prepare all relevant information (including complete transaction data with hash value information, fraud platform URLs, wallet addresses, and screenshots of conversations). The more complete the information, the better.
3. Go to the nearest police station in your place of residence to make a report.
4. Wait for the police officer to contact you (you can use the case number to check the progress on the Police Administration’s case inquiry website).
In most cryptocurrency exchange applications, a series of seemingly random codes can be found in the transaction history of “withdrawal” and “outgoing funds.” On the interface, they are usually displayed as “transaction ID” or “TXID.”
Chen Meihui stated that most victims often do not know “at which point they were scammed” and may even think that their wallet was hacked, leading to asset losses. This completely misdirects the investigation or requires more time to redo the record. Therefore, it is best to save all conversation and transaction records and provide a detailed description of the situation when making a report to expedite the process.
With digitization infiltrating every aspect of people’s lives, the ever-changing methods of fraud are becoming increasingly difficult to defend against. Blockchain, the cryptocurrency industry, and cryptocurrencies themselves are just the outer shell; what needs to be addressed is people’s desire for short-term wealth. The next fraud topic could be AI, so only through education and a perpetually vigilant mindset can more people avoid falling into the trap of fraud.
