The Drug Enforcement Administration (DEA) has reportedly been deceived by a common cryptocurrency scam, resulting in a loss of more than $50,000 in cryptocurrency that had been seized during a three-year investigation into the use of virtual currency for laundering suspected drug proceeds.
What Happened: According to a search warrant reviewed by Forbes, in May of this year, the DEA confiscated slightly over $500,000 in Tether USDT, a dollar-linked cryptocurrency, from two Binance accounts.
These accounts were reportedly suspected to have been utilized for channeling illegal narcotics proceeds. The seized funds were then transferred to DEA-controlled accounts, stored in a secure Trezor hardware-based wallet, and placed within a secure facility.
A scammer had been monitoring the blockchain and noticed when the agency sent a test amount of $45.36 in Tether to the United States Marshals Service as part of the standard forfeiture processing.
Seizing the opportunity, the scammer quickly established a cryptocurrency address that replicated the first five and last four characters of the Marshals’ account. This sly tactic aimed to trick the DEA into believing that the scammer’s address was indeed that of the Marshal’s service.
Exploiting the DEA’s reliance on checking the first and last characters of the account identifier, the scammer “airdropped” the fake address into the DEA’s account by depositing a token that matched the test payment made to the Marshals. Typically, airdropping involves individuals or entities dropping tokens representing a certain currency value into someone’s account, usually as part of a token launch. However, scammers have also abused this method to deceive unsuspecting cryptocurrency owners.
See More: A Stay At The Floating Palace From James Bond's ‘Octopussy’
Why It Matters: The scammer managed to successfully swindle the DEA, receiving a single transaction of just over $55,000. The Marshals ultimately discovered the fraud and promptly alerted the DEA, which in turn reached out to Tether operators to freeze the fake account before the scammer could withdraw the crypto. However, at that time, the funds were already moved.
Working alongside the Federal Bureau of Investigation (FBI), the DEA traced the converted funds to Ethereum ETH/USD and tracked their transfer to a new wallet. The investigators discovered that two Binance accounts had been covering the scammer’s “gas fees” on the Ether network, but the identity of the user remained unknown.
Photo by Igor Faun on Shutterstock
Join Benzinga’s Future of Digital Assets in NYC on Nov. 14, 2023, to stay updated on trends like AI, regulations, SEC actions & institutional adoption in the crypto space. Secure early bird discounted tickets now!
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
