Hong Kong’s securities regulator announced Thursday plans to regulate cryptocurrency exchanges to protect investors. Here, a woman uses her phone as she walks past an ATM machine for digital currency Bitcoin in Hong Kong, Dec. 18, 2017.
ANTHONY WALLACE/AFP/Getty Images
KEY POINTS
The FBI underlined that crypto scams involving the elderly reached $123 million in 2021
Some elderly victims may be suffering from cognitive decline, making them vulnerable to such fraudulent activities
The majority of the elderly lack an understanding of cryptocurrency, which is taken advantage of by scammers
Over the past months, regulators and law enforcement agencies have increased their efforts in cracking down on cryptocurrency scams across the United States, given the chronicity of cryptocurrency-related scams involving the elderly and Bitcoin ATMs.
Cryptocurrency kiosks, more popularly known as Bitcoin ATMs, allow anyone to buy Bitcoin and other crypto assets using cash or debit card. Some Bitcoin ATMs feature bidirectional functionality, allowing users to purchase and sell Bitcoin and other cryptocurrencies for cash.
As of January 2023, there were over 69,000 Bitcoin ATMs scattered across the country, which is good news since these kiosks help promote financial inclusion in areas where access to banking is limited. Moreover, these kiosks allow people heavily reliant on cash to gain access to the digital financial industry and the services it offers.
But, malicious actors and scammers have taken advantage of the availability of these crypto kiosks and converted them into a tool for carrying out their fraudulent activities, which now target the elderly, including those without a crypto account or investment.
Larry Nielsen, an active law enforcement detective in Florida with years of experience investigating financial crimes, spoke to International Business Times on the rising numbers of elderly falling prey to this scam and detailed how these malicious actors orchestrate such fraudulent tactics.
According to Nielsen, this kind of crime involving Bitcoin ATMs and the elderly is what law enforcement is seeing more frequently.
“I have worked many cases involving the elderly being scammed into sending Bitcoin via a Bitcoin ATM,” Nielsen, who also made recoveries of scammed cryptocurrency for the elderly victims said, adding that while he doesn’t “know the exact number,” “those cases keep coming in and the word needs to get out to protect the elderly.”
Nielsen, who hosts the Crypto Fraudcast podcast, is a Certified Fraud Examiner (CFE) and a Cryptocurrency Tracing Certified Examiner (CTCE), also runs a business called Fintech Focus Training and Consulting that allows him to trace transactions and assist connections between victims and “crypto-capable law enforcement.”
As to how these malicious actors execute their scams, Nielsen shared an incident where scammers shocked, frightened, and deceived an elderly woman and swindled her savings.
The victim, according to Nielsen, received a pop-up accompanied by a “very loud noise” that scared her. The pop-up instructed her to call the provided “800 number” to speak to an Apple representative because her mobile phone had a virus and only the given number could resolve it.
The elderly woman was obviously not calling Apple customer support but the scammers. Nielsen said malicious actors like to “shock and awe” and “put the victims directly into a state of being scared and unsure” to make them compliant.
Being elderly, imagine how that is amplified. Then they give a command like “‘Call 1-800-whatever to get rid of the virus on your computer,'” Nielsen said.
“The elderly person, obviously shaken by this, does what the pop-up says to do. They call the number. The scammer answers the phone and pretends to be a representative from Apple (or Microsoft or whatever company they pretended to be in the pop-up message,” he said.
“Once on the phone, the scammer can do a few different things. They can request access to the victim’s computer to check things out themselves. If the victim grants them this access, it’s like opening the door to their home and telling the thief to come on and take whatever they want,” Nielsen further said, explaining that this is how scammers usually take over their victims’ funds or computers and gain access to their bank accounts.
However, the law enforcement investigator said that this particular incident was different since instead of the victim’s device, the malicious actor started talking about the elderly woman’s bank account.
“The scammer then, in all the rush, fear, and confusion gets the victim to tell them where the victim banks. The scammer then starts talking about the victim’s bank account at that specific bank to make it seem more real. The victim doesn’t even realize that the scammer never knew where they banked until the victim told them. This is all part of the scammer playbook. They have scripts and those scripts work,” Nielsen said.
According to Nielsen, in ordinary times, the victim would have easily caught the fraud with the sudden change in the subject, but since the fear and pressure created by the scammer took over, she didn’t notice any of the tell-tale clues.
Nielsen said that the victim was stuck in an OODA Loop – an acronym for Observe, Orient, Act, and Decide – which is a concept engineered to be the base for rational thinking in chaotic or confusing situations.
“It seems like the victims in these cases, especially the elderly, get stuck between Observe and Decide,” he said, adding, “They can’t seem to Orient themselves. The easiest and safest thing, or it feels this way at the time, is to let the scammer guide them to a satisfactory end to the situation”.
Given the victim’s emotional or psychological condition at the time, the scammer would then tell the victim that she had some “embarrassing charges” in her bank account, which were the reasons why her account would be frozen, and the funds would be seized by authorities at the end of the day.
“The victim is obviously in mental and emotional distress at this point and just wants a way out,” Nielsen said.
The scammer then offered a solution to the victim and advised her to withdraw $35,000 and deposit it into a Bitcoin ATM near her area to “safeguard the funds and to be able to wipe the embarrassing charges from the victim’s account.”
According to Nielsen, “The victim had never dealt with cryptocurrency before. They didn’t realize what the scammer was saying didn’t make any sense and they were still stuck in that OODA loop letting the scammer lead the way.”
As the victim had never owned any crypto and had no idea how it works, the scammer stayed on the phone and walked her through the process of depositing her funds into the machine, purchasing Bitcoin and sending the funds to the scammer’s wallet.
Nielsen said the scammers were aware that Bitcoin ATMs come with a warning informing people that they may be a victim of scams, but these malicious actors already knew that and advised the victim to just ignore