Fraudulent Recovery Services: How Not to Fall for a Scam Twice | Binance Blog (2024)

Main Takeaways

• There are many private blockchain investigators promising recovery of stolen digital funds. Most produce investigation reports of little value or are downright fraudulent. Think twice before paying for a false hope of getting your assets back!

• Actual recovery is dependent on police seizure orders and assistance from cryptocurrency exchanges.

• Learn more about fraudulent recovery services and how to spot them from those with first-hand expertise – the members of Binance’s Global Intelligence and Investigations team.

Among many criminal schemes that seek to part cryptocurrency users from their funds, fraudulent recovery services hold a special spot. Scammers that use this method pose as providing a legitimate avenue to recover funds that victims have lost via theft, fraud, or hacking, essentially targeting the people who had already lost their money to criminals.

A Familiar Threat

Being the victim of an investment or other type of scam can be emotionally and financially devastating, stressful, and embarrassing. Oftentimes, there is a great deal of confusion and uncertainty. Is the money truly gone? Who is behind the fraud? What recourse do I have and who should I report it to? Unfortunately, there are bad actors out there waiting to take advantage of victims by offering fraudulent recovery services.

Such schemes are another form of an “advance-fee fraud” whereby victims pay upfront expecting larger returns later. This is not a new scheme, and one not exclusive to the digital asset space. Regulatory agencies and law enforcement around the world have previously warned users about the dangers of illegitimate asset recovery services. However, following the impressive global growth of cryptocurrency adoption, it is not surprising to see criminals refocusing some of their activities on this sector.

Regulators and consumer protection advocates have provided advice on how to identify and avoid fraudulent recovery services. The US Commodity Futures Trading Commission (CFTC) has warned consumers that these services run promotions in places where victims are looking for help, such as in the media. In our work with Binance’s Global Intelligence and Investigations team, we have encountered suspects advertising cryptocurrency fraud on social networks, forums, and consumer review websites focused on investment losses. Below are some common components of cryptocurrency-specific recovery scams that our team has identified.

Predatory fee structures

Predatory recovery services mostly require a flat fee upfront for their services regardless of the outcome of their tracing or fund recovery. Often, they will require a fee before engaging with victims’ cases at all. The US Federal Trade Commission (FTC) warns that these upfront fees can be called many different things, including a “retainer fee,” “processing fee,” or “administrative charge.”

The FTC notes that in the United States, “telemarketers selling recovery services can’t ask for or accept payment until seven business days after they deliver the money or the item they recovered to you because it’s against the law.”

In addition to not paying these fees, victims should also avoid sharing sensitive details such as their bank account information with the alleged recovery services.

Connections to Fraud Networks

Fraudulent recovery services are often owned by individuals connected to investment fraud networks. Government agencies have issued warnings about such services, noting that they commonly recycle victim lists from the initial scams.

A quick Google or Linkedin search for employees of such companies can often reveal employment histories at companies that have been the subject of regulatory actions, critical media reporting, and/or poor user reviews. Many of these companies attempt to conceal their true locations, portraying themselves as registered in or operating from jurisdictions like the United States or United Kingdom, while searches show that their “employees” are actually located in the same locations as the perpetrators of the original frauds.

Services Offered by Private Cryptocurrency Investigators

The transparent nature of blockchain allows anyone to see details of each and every cryptocurrency transaction. Consequently, there are many self-proclaimed private blockchain experts and investigators promising to help victims trace their stolen funds. While these services are different from the outright scams mentioned above, there are still issues that customers should be aware of.

Again, practically all such private services require upfront payments regardless of the outcome. The reason is obvious: if they were to receive funds only when the victim actually recovers losses, most of them would be out of business very soon. In fact, when pressed, some of these services later state that they don’t actually provide recovery, only “pre-recovery services.”

Unlike fraudulent recovery services, private tracing investigators actually produce something to show their work. Oftentimes the result comes in the form of a report that attempts to identify the location of their customer’s funds. This tracing tends to be of rather poor quality, created by automated tools without human review, and is often so ambitious that it is detached from reality. In an effort to provide their client a neat answer, these services often trace through mixers or unidentified exchanges.

These companies never fail to claim they identified where the money had gone – after all, they are in the business of selling unrealistic expectations. In reality, blockchain tracing can be complicated and return indeterminate results – it is as much an art as a science.

Binance’s Policy: Legitimate Requests Only

Despite the claims they make to their clients, private companies can never recover stolen funds on their own. Instead, they attempt to rely on information-sharing from exchanges, which they often cannot secure because legitimate services in the industry are bound by privacy regulations and obligations to users to not share customer data with unauthorized third parties.

Binance’s position is that we do not process requests coming from private investigators without involvement from law enforcement or a legitimate legal request. The least reputable of these services repeatedly spam exchanges with requests, despite knowing that they have little chance of success without going through the proper channels. Therefore, our advice is this: if you want to have a shot of recovering your funds, report the crime to law enforcement instead of engaging a third-party recovery service!

If you were hacked or fell for a scam and are thinking of contracting private investigators – think again. Keep in mind that what you would most likely be paying for is a report of indeterminate quality, not the actual recovery of your funds. If you are a Binance customer, you can also report the loss to Binance customer support.

Reporting to Law Enforcement

The process for reporting incidents of crypto fraud differs around the world. In the United States, for example, victims may report a crime via IC3, the FBI’s Internet Crime Complaint Center, while those living in the European Union may report through their national police agencies (updated links are provided by Europol).

In many countries, however, it may be more efficient to report the incident in person; this especially applies to more serious incidents or those resulting in large losses. You should provide as much information as possible when reporting, including any communications, contact details, social media profiles, and relevant cryptocurrency addresses and transactions.

For law enforcement agencies that require our assistance, Binance maintains a dedicated request form on our portal.

By Jen Hicks, Jarek Jakubcek, and Erin Fracolli from Binance’s Global Intelligence and Investigations team.