The Crypto Detectives: Tracking Down Stolen Funds

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[00:00:01] Bob: This week on The Perfect Scam.

[00:00:04] Det. Scott Simons: The $550,000 that the victim lost went into a particular wallet with additional funds, and we were able to trace those additional funds back to other victims. So we ended up seizing all $800,000. 

[00:00:21] Bob: And, and found a whole host of other victims, right?

[00:00:23] Det. Scott Simons: Absolutely. We'll say at least three dozen other victims. The bare minimum, tens of millions of dollars have gone through that particular wallet.

[00:00:32] Bob: Tens of millions of dollars. Wow.

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[00:00:39] Bob: Welcome back to The Perfect Scam. I'm your host, Bob Sullivan.

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[00:00:45] Bob: Not long ago, almost every Perfect Scam episode involved theft of money via gift cards. Today you've probably noticed, cryptocurrency seems to be the tool of choice among online thieves. You might have heard that crooks like crypto because it's anonymous, can't be traced, and once the transaction is submitted, it can't be reversed. Well today's story will show you that's not completely true. Thanks to the efforts of some relentless law enforcement officials, crypto crimes aren't hopeless, as you'll hear. Today's story also includes information that's empowering that you need to know in case you or someone you love is involved in a crypto crime. To help us understand all this, we've got a couple of experts who know how to track down stolen money through cyberspace. But first, Paul is here to talk about what happened to him when he was in, perhaps, the most vulnerable state a man can be in. He was a young, single dad with three kids and it's only four months since he lost his wife to cancer.

[00:01:49] Paul: But I was still in the condition of kind of shock and disorientment, so I was trying to get my life back.

[00:01:57] Bob: But shock, I'm sure is understating it, right? You have three kids together and you're suddenly a single dad.

[00:02:03] Paul: Yes, so it was, it was tough. So...

[00:02:07] Bob: Paul, that's not his real name, he asked that we protect his identity, is just killing time on Facebook working through all the issues that come up when a tragedy like that strikes when a woman reaches out to him, starts flirting with him. He enjoys the chat for a few days, but quickly realizes she's not a good match and breaks it off. Two weeks later another woman sends him a friend request and then a private message. They get to talking.

[00:02:35] Paul: I started enjoying that conversation with that second person, and we were talking for about two weeks, and we were talking a lot, and we had even a video call. It was a really short one, maybe a couple minutes or so, with not good quality. So it gave me a confidence that I'm talking to a real person.

[00:02:58] Bob: Can you describe the call to me at all?

[00:03:00] Paul: Call did not look anything weird, so she was just sitting at the table in some living room or whatever, a normal background, nothing special, just small window, a couple curtains, black hair in a ponytail and stuff like that. So we just talked a little bit, and then so she was basically saying, I have another call. I'm busy. It was totally a normal call. Nothing really special.

[00:03:29] Bob: The video call reassures Paul that this woman who says she works in an office in New York City is real and the relationship has real potential, so they keep talking. A few weeks later the conversation turns to money.

[00:03:45] Paul: She asked me how I'm doing financially, I said, I'm doing okay, but could be better because my wife passed and I lost, we lost as a family half of our income. She was making it sound like I really want to help you...

[00:03:58] Bob: Paul is now trying to get by on just one income with three kids and it's not easy. His new friend offers to help.

[00:04:07] Paul: Yeah, yeah, so she was claiming that she had a godfather, her mentor, a financial mentor that had some private equity firm that he's established with his inner circle and they do some option future, futures trading. And they were trading like gold futures, some ATFX platform, and she basically said if you want to trade, I can help you.

[00:04:33] Bob: Mind you, it is just a passing conversation.

[00:04:36] Paul: And we're talking 95% of our conversations were not about money. We talked about life, everything in the world, right and stuff like that. And...

[00:04:45] Bob: You talked about your kids, right?

[00:04:46] Paul: Yeah, a lot and I even sent her a few pictures of my kids, myself. She saw them on Facebook anyway. And then she's obviously, oh your kids are great and stuff like that.

[00:04:57] Bob: In fact, she does more than talk about the kids and compliment the family portraits. She makes one of her own.

[00:05:06] Paul: She basically, probably using the picture of myself and the kids, she or whoever was there, they basically painted a picture of me, my kids, and her sitting together and, and the Mt. Fuji in the background and it was a real picture, and then after that she send like a clip of 10-15 seconds where the person that was like painting that, I saw like the hand like finishing up, doing some finishing touches on the painting, so that was like, I'm like, whoa, this is amazing. And that person decided to just and drew a picture of me, my kids, and herself telling that yeah, I want to be with you. And I'm like and at this point I'm thinking, man, this is a gift from God, this is just amazing.

[00:05:51] Bob: She basically created a family portrait with all of you, right?

[00:05:53] Paul: Yeah. Yeah.

[00:05:56] Bob: This family portrait makes this recent widow feel like he received a gift from God. So as they keep talking the next time she brings up helping him financially, Paul is ready to follow her suggestions which involve crypto. But not just crypto, she tells him to set up a crypto account, but then at her godfather's advice, to invest the crypto in options. And right away, Paul cleans up.

[00:06:25] Paul: Basically we started, we did the first trade, which I made like $1500 on the first trade supposedly, and then she showed me how to withdraw money...

[00:06:37] Bob: On a $19,000 investment, Paul quickly makes $1500. And he's able to withdraw that $1500 back to his own checking account. He has cash in hand. It worked.

[00:06:52] Paul: And after that, I already had a lot of confidence that yeah, the process is working, it's legit. I can withdraw money in time if I want and after that it's just was going on and on.

[00:07:05] Bob: And so for the next three months Paul keeps following his girlfriend's advice and his account balance keeps growing and growing.

[00:07:15] Paul: We did 10, 15 trades and during this period of time she was putting some pressure on, on me. "Oh, you need to move more money, you have more principal in your account. You can trade higher leverage, make even more profit." And then I was trying to give her some money. Got my savings, got, took out a bunch of loans thinking that it just will make money and then she started saying, you need to hurry up because the opportunity is going away. My godfather said that next month, it was actually January already, and she said next month opportunity will be, will cease and you, we need to finish these last trades and yeah. So it was a lot of pressure put on me. I did try to do my best to raise money from all over with places where I could.

[00:08:05] Bob: One of those places is to borrow against his property. But it all seems to be paying off handsomely.

[00:08:13] Bob: At that point, you thought you had investments worth about one and a half million dollars, right?

[00:08:17] Paul: Yeah, yeah, it was like I invested like 450 and in three months after all these, so it got me to a hundred, or 1,445,000, something like that.

[00:08:30] Bob: And so at that point, with 1.4 million dollars in hand, Paul decides it's time to take some of those winnings off the table.

[00:08:40] Paul: And that's when I submitted withdrawal request and I got a message from their support that I first have to pay taxes before they give me any money. I said, "Can you give me money first so I can pay the taxes?"

[00:08:54] Bob: No, they say. He has to pay the taxes first, which he can't afford to do.

[00:09:01] Paul: She's like, can you try to raise anything, more money to pay taxes. I'm like, I cannot. I just, I'm done. I'm done. And then so anyway, in the end I finally reached out to one of my relatives who is like businessman, he does some investments as well and he just started looking with me at that stuff, and that's where did research and we kind of uncovered that it was all a scam.

[00:09:28] Bob: That, that must have been a horrible moment for you.

[00:09:31] Paul: Oh yeah, yeah, no I was like first two days I was like completely out.

[00:09:37] Bob: It was all a scam. Paul's losses staggering.

[00:09:45] Paul: Yeah, I, I have one home that was paid off and another home I have mortgage on that I'm living in, and so my first home I'm renting out. But so that home was paid off and I took two loans again, two mortgages against that house. While the total sum is about half of the cost of the house, and I took personal loan, and I took my some loan from, from 401K, and then I have some investments in Schwab, so I took them out thinking temporarily to like invest or trade. So anyway, overall it came out to $450,000 total, all loans and things and everything, that's how much I lost total, which again, it's basically bringing me down to almost nothing.

[00:10:32] Bob: Down to almost nothing. This young widower, his life torn apart again. As the days turn to weeks, Paul starts doing more research on what happened and finds a news story about a crime that is eerily similar. But he also finds a name, and that name radically changes his fortunes.

[00:10:55] Paul: When I read the article, it was almost identical to my situation, which was an eye-opener to me. I'm like, hurray, I'm not the only one to get trapped like that. And then the detective was Scott Simons, so I called him. There, I, I found him on LinkedIn, and he even had his like phone number, or maybe somewhere on the website I found his phone number. So I called him.

Phone Rings

[00:11:20] Det. Scott Simons: My name is Scott Simons. I am a detective with the Greenfield Police Department, which is a suburb in Milwaukee County, Wisconsin. I have worked for the Greenfield Police Department for about 23 years now. A lot of my investigations I focused more on the cyber element of drug trafficking which would be drug trafficking online, the Dark Web was involved a lot, and different types of messaging platforms, so based on those types of investigations, I got into the cryptocurrency space which is, as you can probably imagine, when you're purchasing controlled substances through the Dark Web and the internet, the most common payment method is going to be cryptocurrency. That's how I got into the larger transnational money laundering and cryptocurrency space.

[00:12:17] Bob: And even though Detective Simons works in Wisconsin, he helps crypto victims from all over the US. He remembers when Paul reached out to him.

[00:12:26] Det. Scott Simons: So yes, just very devastating. The position he's in being a widow, having children. Anybody losing that amount of money it's going to be devastating. So yes, he actually reached out to me through LinkedIn. He found me on there, he found that I had success with these types of cases in the past, and just like all the other victims I hear from, he's tried everything. He's done research online himself, he's reported it to the FBI's database, IC3. He's reported it to the FTC database. Can't recall if he had at that point, I think he did, but I know eventually he reported it to his local police department or sheriff's office, and it's, the victims just don't know what to do. So yes, he had reached out to me to see if there was anything I could do to help him.

[00:13:15] Bob: When you reached out to him, did you even think he would answer the phone?

[00:13:20] Paul: No, actually I was surprised because when I read the article, I'm like okay, it seems legit. This guy messages, and I called him, he picked up the phone right away, and then we talked a little. He said, please send me additional information through LinkedIn.

[00:13:35] Det. Scott Simons: Yeah, like I said, I get contacted by quite a few victims, but what I did with him was pretty typical. I asked for some more details about what he's been through, the type of scam it is, if he's reported it to any law enforcement already. The one thing we don't want to do is I don't want to be actively working an investigation that another law enforcement agency is. So yeah, I started with getting the background information. I asked him to send me all his transaction data so I could start looking at the transactions and see if I could determine if the funds may have gone somewhere that we might be able to freeze, recover, or at least what--, we describe it as putting an alert or a watch on funds, perhaps the cryptocurrency may be sitting in an unhosted wallet and we can set up an alert to notify us if the funds end up moving.

[00:14:29] Bob: Okay, what's an unhosted wallet?

[00:14:32] Det. Scott Simons: So it really depends on what type of wallet somebody might be using. So an unhosted wallet is going to be, I could right now in 30 seconds create a cryptocurrency wallet on my cellphone or on my laptop. That type of wallet is typically going to be referred to as unhosted; it means there's no, even though a company has developed the software, I hold the private keys to that wallet, that means I'm the one who controls all the cryptocurrency. There's no third party or other hosted company that would be able to freeze or take custody of the funds.

[00:15:11] Bob: But if the wallet is hosted, Detective Simons has a place to send a court order, and then there's a chance the money in that wallet can be frozen or even recovered by law enforcement via court procedures.

[00:15:25] Bob: Okay, and when you put cryptocurrency on a watch list, tell--, this is the metaphor I have in my brain, but essentially a pile of cryptocurrency has a phrase, a token attached to it, and you can just put up a search. The way I would search, I'd create an alert on Google for stories about scams, I can even create an alert for a certain pile of money that makes, that is involved in a transaction. Is that the right way to think about it?

[00:15:54] Det. Simons: Yeah, that's fairly accurate. So a cryptocurrency, think of a cryptocurrency wallet as just a, like a bank account for cryptocurrency. Each wallet with have multiple addresses depending on the type of cryptocurrency. So what I can do is put an alert on that particular cryptocurrency address, and it, I can set it up differently, but it will send me a, an alert to let me know if funds left that address or if funds came into that address.

[00:16:26] Bob: But you need to know what wallet to be looking at, is that right?

[00:16:30] Det. Scott Simons: I, that, that is correct. I do need to know that.

[00:16:33] Bob: Sometimes you're in a situation where you might know this per--, this victim's stolen money is in this wallet, but there's nothing we can do unless it goes somewhere else where we can execute a court order or something.

[00:16:45] Det. Simons: Yes. So the type of wallet I was just referring to would be the unhosted wallet, and then there would be what we call a custodial wallet which would normally be with a third party service like just for an example, Coinbase, Binance, Kraken, those types of services, and again, that's what I would describe as a bank for cryptocurrency. Just like if I have a bank robber steal cash from one bank and I follow him and he deposits the cash into his bank account at another bank, I can serve this bank with a warrant, and they will essentially freeze those funds, and turn the cash over to me.

[00:17:31] Bob: And in Paul's case, at least some of the crypto stolen from him is in a place where Detective Simons can track it.

[00:17:39] Det. Scott Simons: I traced some of it to one of those unhosted wallets we were talking about to where I can see what the current balance is, I don't know who controls that wallet, but I know the funds are in there. I looked back at the history of that wallet, and I saw almost all of the funds were going to a particular swapping service. I reached out to that swapping service and I said, "Hey, if any more funds come into your service from this particular wallet which is holding Paul's stolen bitcoin, I want you to grab those funds, and I want you to contact me." So I sat there watching that wallet for months.

[00:18:24] Bob: So let's get this straight. Detective Simons can see some of the crypto, where it's sitting, but he can't do anything until the criminal tries to move money in and out of that wallet. But he does have a relationship with this swapping service. Swapping service - that's a service that lets crypto holders change from one kind of cryptocurrency to another.

[00:18:44] Bob: So he was aware this whole time that his money is sitting somewhere in cyberspace, but there's nothing he could do until whoever controlled it tried to run away with it.

[00:18:54] Det. Scott Simons: That is correct, and obviously, you can image how frustrating that is for victims.

[00:18:59] Bob: Oh my god, I can't begin to imagine how frustrating that is, wow.

[00:19:02] Det. Scott Simons: Yeah, well try telling a victim, we know exactly where your funds are, we can see them, we just can't do anything about it.

[00:19:10] Bob: Wow, and so this is, it's really a matter of how patient, the criminals obviously know this is going on, and they're going to try to wait you out.

[00:19:18] Bob: Weeks, months, go by, but then the criminal makes their move. And so does Detective Simons.

[00:19:28] Det. Scott Simons: I had that alert set up. Paul, of course, kept checking in with me every few weeks, every month, and the only answer I could have for him was, I, I'm hoping for the best, the funds are still there, and not too long ago, maybe a couple months ago, I got that alert saying, "Funds moved." It went to that swapping service, and as of today with the value of bitcoin, I think it comes out to, uh, yeah, I think it was about $80,000 at the time. I was so excited for Paul, I immediately reached out to the swapping service myself. And, but they confirmed, yes, they were able to grab those funds and they froze them for me.

[00:20:09] Bob: That's just remarkable, but what is it like to place that phone call where you get to call somebody like Paul and say, I've got good news, we, we've tracked the money.

[00:20:17] Det. Simons: It feels good. I actually have another case right now where I just froze $90,000 about 24 hours ago.

[00:20:24] Bob: Oh wow. Congratulations.

[00:20:24] Det. Scott Simons: ...so I'm waiting, yeah, but thank you. I'm waiting to get that warrant signed before I give that call to the victim. It is, as excited as I am to call the victim, the last thing I want to do is say we have your funds and it turns out we can't get it.

[00:20:38] Bob: Ah yeah.

[00:20:38] Det. Scott Simons: But yes, making that call is great. But I still have to remember that $80,000 that Paul re--, recovered, that's not even, that's a small portion of what he lost. Yeah, getting $80,000 back is great, but we still need to do better.

[00:20:56] Bob: It's not everything Paul had stolen, it's only a fraction, but still $80,000 is a lot of money to get back.

[00:21:05] Paul: So I didn't even plan that I'll get any money back, but now I did this. And it was, I was able to pay off two personal debt with essentially the highest monthly payment. That basically, now I see that now it's extra cash flow for me so to speak. I think it was like four to six weeks after that that I got the money.

[00:21:27] Bob: But he sounds, he sounds like a hero to me.

[00:21:30] Paul: Yeah, he, I'm really impressed with these guys. I never had any interaction with law enforcement before that for better, for good, but after whole, this whole situation I'm looking at these people and I'm realizing that there are people that want to be famous, want to be rich, want to do, to be cool, and then there are people that just want to have justice, just want to do justice because that's what I see from these guys, you know, how they acted. Because after I got this refund, I even sent message to Scott saying, "Hey, thank you for your help. I'd like to compensate you." I was kind of offering, I wanted to give some, some money for his services to me because and he said, "Don't worry about that. I don't need any money from you," which is to me, I'm like it's, yeah, I have never seen him never, really talked to him on the phone one time and then after that it was only texting. And then yet he still kind of did his best to help me. Yeah, I think he do, he and my investigator, these guys are, are really work very impressively and I'm, I'm really proud of that. So, really happy too that they worked with me on that issue trying to help me.

[00:22:37] Bob: Yeah, that's nice to hear there are people who just want justice and just want to do the right thing.

[00:22:40] Paul: Yeah, yeah, it's a great attitude, like I said, I never, I never experienced that.

[00:22:47] Bob: In this case, waiting worked, but it doesn't always work.

[00:22:52] Det. Scott Simons: I guess Paul's case was a little unique. It's not unheard of for funds to sit for weeks, months. I even had one sit for about a year and a half, two years, in, in one particular case. Most of the time within hours or days, the funds are gone, which makes it much more difficult for law enforcement. But in his case, and I see this more in the larger investment scams where we're not talking victims losing $2000, $8000, we're talking hundreds of thousands of dollars, if not millions of dollars. I see those funds sit there for longer, and most of these scammers are overseas, so my assumption is, what is the scammer going to do with the $25 million they have just sitting in unhosted wallets? I just don't think they know what to do with the funds, they don't know how to clean the funds, and in a lot of these countries with the cost of living, what are they doing to do with $25 million? So they tend to sit a little bit longer in some of these cases.

[00:24:03] Bob: Detective Simons has enjoyed success in several crypto crime cases. We talked about another situation.

[00:24:10] Det. Scott Simons: Yep, so I think we actually ended up seizing over $800,000 in that case.

[00:24:15] Bob: Oh Wow.

[00:24:16] Det. Scott Simons: Yeah, the, our local victim had lost about $550,000. We, we're actually recovering more than what our local victim lost. Um, and the reason we're doing that is because the $550,000 that the victim lost went into a particular wallet with additional funds, and we were able to trace those additional funds back to other victims. So we ended up seizing all $800,000, and we're actually, more recently we froze another $440,000 in that same case. So we're working on the warrant for that right now.

[00:24:57] Bob: And, and found a whole host of other victims, right?

[00:25:00] Det. Scott Simons: Absolutely. We'll say at least three dozen other victims.

[00:25:04] Bob: Wow. It stands to reason for me that whatever wallet you've traced stolen money to, that wallet is probably just involved in stealing money in general. So anything else in there is probably bad too.

[00:25:15] Det. Simons: Yeah. The bare minimum, tens of millions of dollars have gone through that particular wallet.

[00:25:20] Bob: Tens of millions of dollars. Wow.

[00:25:23] Bob: Back to how we started this episode. You've probably gotten the idea that stolen crypto is gone forever. Law enforcement officials often say there's nothing they can do when money is stolen via crypto. But Detective Simons has a different perspective.

[00:25:41] Det. Scott Simons: Yes, so I, I think my first cyber or cryptocurrency case would, would have been in 2015. I wanted to start getting into the cyber investigations and I was told by a lot of the federal agents, don't do it. The federal agencies don't have a lot of support for that sort of thing, especially the cryptocurrency space, and me being a little stubborn I thought, hey, I'll figure it out along the way and teach myself, ask questions of people when I need it, and that's how it got started at least.

[00:26:17] Bob: Hmm. Uh, they told you not get, get involved in it because it just was, the situation was hopeless basically?

[00:26:24] Det. Simons: I wouldn't say hopeless, just that there wasn't a lot of support for agents and task force agents like me out in the field. You have to keep in mind, this was 10 years ago, so a lot has happened in the last 10 years with cryptocurrency, and resources and knowledge and tools that law enforcement now have available, 10 years ago it just wasn't there.

[00:26:46] Bob: And 10 years ago this would be 1 in 100 crimes. Today it feels like it's almost every crime involves crypto, or at least all the ones that bubble up to me.

[00:26:54] Det. Simons: Very close to it, yes. It, I will, I like to say that any type of investigation where money would normally have been involved, that exact same case could be investigated with cryptocurrency, or I should say, committed with cryptocurrency.

[00:27:10] Bob: I'm not afraid to get into a little bit of the technical aspect because I think that listeners will find that interesting too, but so let me try to see if we can paint the picture here because when I think of cryptocurrency theft, I hear two equal and opposite stories. One story is international, they move it around really quickly, and then the money, poof. It's gone. The other story, it's all in the watching. So if you know how to follow the money you always know exactly where it is, there's no way for them, it's all very public, and those two stories are opposite. So can you explain to me why these both are true?

[00:27:43] Det. Simons: Yeah, they definitely both are true. Yeah, we like to refer to cryptocurrency as pseudo anonymous. Oftentimes, you don't know who's behind the person in control of the cryptocurrency or the person who can move the cryptocurrency. It really, I'm not going to get into all the technicalities here, but it really depends on what type of crypto wallet the funds are in. So yes, I guess we'll start with your second argument or second point there. If you have the correct resources, the correct tools, the correct training, you can normally follow the cryptocurrency. That is true. But there, the cryptocurrency may hit a particular service or exchange eventually that maybe just doesn't cooperate with law enforcement. Obviously, that's a hurdle. If that happens, we probably can't follow it anymore. Luckily for us, there are quite a few of these exchanges and services that do cooperate, or our more sophisticated crypto tracing tools can trace through some of them as well. I would say where your first point becomes more valid is when the scammer, the suspect is more sophisticated with their money laundering techniques. If they're using particular mixers, some mixers we can trace through, others are a bit more difficult.

[00:29:14] Bob: Okay, so define mixer for me.

[00:29:16] Det. Scott Simons: Yep, good question. So a mixer, in simple terms, is basically I send my funds into a mixer, it's a service. And the sole purpose of a mixer service is to obfuscate or make it difficult to follow the flow of funds. So let's say I sent my funds into this mixer service and a thousand other users do the exact same thing. All the funds get mixed up together and then on the backend of the service my funds get kicked out somewhere and a lot of the tools we have, it just will not show where my funds specifically came out. So that's essentially, in simple terms, what a mixer is doing.

[00:29:58] Bob: So everybody's got one penny. People throw 100 pennies into this mixer, it gets shook up, you get a penny out the other end, but it's a different penny than the one you put in, so no one can trace it.

[00:30:07] Det. Simons: That is accurate.

[00:30:09] Bob: So if you're listening and you or someone you know has been involved in a crypto crime and reported it in all the standard ways and been told by law enforcement there's nothing we can do, what should you do next?

[00:30:21] Det. Scott Simons: Feel free to reach out to, the FBI has an email line, the Secret Service has an email line. I understand not all cases are going to meet their internal thresholds. In addition to working for the Greenfield Police Department, I am part of an organization, a non-profit called Operation Shamrock. It is a private/public sector collaboration. I had talked about, you know, other sectors doing a better job such, such as the financial industry. They are also part of Operation Shamrock. The particular team I am part of is called the Triage Team. Victims can go to the Operation Shamrock website. Um, sub--, there's a link there. You can submit your report, all the transaction details type of summary of what happened, and that report will end up coming to our triage team. You will get one of our investigators who, I guarantee you, we have the training and we have the, the tracing tools, the resources to look at your case. No promises that we can recover cryptocurrency, but we can at least look at your case and give you some guidance. If it looks like there's something that can be frozen or something that can be done, we oftentimes will reach out to your local police department or sheriff's office, and we can work with them.

[00:31:44] Bob: Hon--, honestly I think that's fantastic and the world has been crying out for such a service, so thank you for doing it.

[00:31:51] Det. Scott Simons: I absolutely enjoy it. It keeps my skills fresh and things are constantly changing with cryptocurrency; we're talking weekly. So to be able to work these cases on a regular basis just means I'm able to perform a better service to victims, and the fact that I'm able to recover funds for, again, it's not all, but at least a good sig--, a significant amount of victims. I enjoy doing that.

[00:32:17] Bob: Operation Shamrock. That's a new organization designed to offer hope to crypto victims who before used to feel like they had nowhere else to turn. It was founded by an old friend of The Perfect Scam, Erin West.

[00:32:32] Erin West: I was a prosecutor for 26½ years in Santa Clara County, and I really was overcome by how many victims I was seeing of financial fraud scams committed using cryptocurrency. And so I, I did as much as I could at the local law enforcement level, and I realized the problem was so big that I really needed to be able to include other parts of the ecosystem of this fraud. And so I retired and I started a nonprofit called Operation Shamrock. And our mission is to educate about, mobilize against, and disrupt transnational organized criminals.

[00:33:15] Bob: That's a really big task there, Erin. There's a lot of them.

[00:33:18] Erin West: Yeah, there's a lot of them, and, and they're organized and they are well-funded, and they are well-educated as to how to do this crime, and so it's a big job.

[00:33:29] Bob: But they don't have Erin West on their side.

[00:33:30] Erin West: (laughs) No, they've got Erin West coming for them.

[00:33:34] Bob: Operation Shamrock also has Detective Simons on their side.

[00:33:39] Erin West: Okay, first of all, Detective Simons is as good as they come. He is an amazing force for victims in the United States right now. I can think of only a handful of people that are working as hard for victims as Detective Scott Simons. I came into contact with him because I started a group of like-minded investigators/prosecutors who were working on cases involving cryptocurrency, and we started with 85 members in 2022 and we're up to 2400 today. And Detective Simons came out of the woodwork early on as someone who really knew the trade, the craft, how to trace and how to determine where money was moving, and with a willingness to work hard, work extra hours for the benefit of victims, and the third part of that is to try things that haven't been done before, to be an innovator for how we get money back in the hands of victims. And the more I worked with him, the more consistently impressed I was with his knowledge, his work ethic, and his kind heart about fixing a major problem, and being a force for good in fixing an international crisis.

[00:35:02] Bob: And Erin urges victims to reach out to Operation Shamrock and to Detective Simons' triage team.

[00:35:11] Erin West: So what we would encourage victims to do is go to OperationShamrock.org and click on there, Report a Scam, and Simons' team that he leads, there is 20 of them, also have the time and energy to look at your case. So the takeaway should be yeah, there are people like Simons and they work for Operation Shamrock, so go to the OperationShamrock.org website and click on there and report your scam through there, and someone will look at it in real time and most importantly, Bob, they will give the victim an answer, and that is what has been lacking for so long, is victims are reporting into black holes, and no one is telling them what's happening to their case. If you report through OperationShamrock.org, you will get a communication from a law enforcement official who will tell you whether there's any hope of recovering your assets.

[00:36:03] Bob: That's fantastic because I've been screaming that for a long time. People fill out FTC reports or whatnot, and then they hope, they expect something to happen and nothing happens; they're not even sure that the report was filed, and that's a terrible experience. So you guys, even if you fill out a report with your local police or the FTC, they should fill out a report with you too, you're saying.

[00:36:19] Erin West: Yes, they should.

[00:36:21] Bob: I just want you to reiterate that point a little bit. If I'm the victim and I go to Operation Shamrock, an investigator's actually going to at least get back to me and say, we've done, we've tried. Is that right?

[00:36:31] Det. Simons: Yep, absolutely. I, I would, I guess I don't have an exact timeline, but we try to reach out; it really depends what time the report comes in, but we try to reach out within a day or two. It might be by email; it might be a phone call. So if you hear from one of us, please ask questions, confirm we are who we say we are. I completely understand a lot of these scams involve law enforcement impersonation, so please confirm who we are, but yes, one of us will definitely reach out to you. I think, of course, we would like to recover every dollar that the victim lost. That just, unfortunately, is not how most cases go. But at the very least, and I do think this is very important, is to give some closure to victims to where they're not wondering, is there something else I could do? Is there something else my police department could do? We will take a look at your case and we will tell you what can be done or if something can't be done, we will explain why that is.

[00:37:34] Bob: While the recovery in Paul's case was only partial, it did make a big difference in his financial situation.

[00:37:43] Erin West: I love that so much for Paul, because it will enable him to continue to have trust in our law enforcement system.

[00:37:54] Bob: Now I suppose it's a thin line to walk to tell people yes, there is hope if you've had, been the victim of this crime, but we don't want to give people false hope, right, it's not like it's always recoverable. How do you walk that line?

[00:38:06] Erin West: It's very important to me that victims be given straight talk about the likelihood of recovery, and the fact is, if you don't get that information in front of law enforcement within 24 to 48 hours, your chances of recovering any money go down significantly.

[00:38:25] Bob: And, and this is absolutely critical. While law enforcement might have a chance to recover stolen crypto, there are plenty of criminals out there who lie about their ability to do so.

[00:38:37] Erin West: We have bad actors out there who are retargeting these victims and misleading them into believing that they can get the money back. The fact is the only people that can get your money back for you right now are law enforcement. So if a private party is telling you that they can get your money back for you, that is a lie and you should not pay them any money. You should never be paying anybody any money to recover your assets, because it's highly unlikely that they can actually do it.

[00:39:07] Bob: So making sure you, you're getting help from the right people is probably really hard, right?

[00:39:12] Erin West: Yeah, 100%. I, it is really difficult for victims to know who to trust when they have just been misled by the love of their lives. And then they go to law enforcement, and law enforcement often is unequipped to help them. And so they think we really need, I, I need someone, so I'm going to do a Google search, and I'm going to start calling people on the internet to get them to help me get this money back.

[00:39:37] Bob: And that Google search can lead crime victims right into the arms of another criminal. So despite the good news about Operation Shamrock, there's still plenty to worry about.

[00:39:51] Erin West: I want people to understand that this threat is not going away, that there are compounds staffed with hundreds of thousands of people, often human trafficked people, who are in the daily business of trying to find a way to connect with you or your mom or your cousin or your kid's soccer coach, and steal your money. And that is not going away anytime soon. So what I would caution people is to be really aware of anyone who is trying to communicate with you on an electronic way that you did not invite. You should assume every text message that comes from someone you don't know is a scam until otherwise proven. We just can't be too cautious right now when there is an industry that is running for the sole purpose of stealing all of our money.

[00:40:45] Bob: Can't be too cautious right now. Gosh, that's depressing, isn't it?

[00:40:48] Erin West: Isn't it? It, it ruins my day every day. Yeah.

[00:40:52] Bob: Can't be too cautious because cryptocurrency is still very much like the Wild West.

[00:40:59] Det. Scott Simons: So I, I think cryptocurrency should be perfectly legal. I believe, like currency, like ATMs, not crypto ATMs, that's a different animal, but the banks, Venmo, PayPal; there is regulation on all of these. There needs to be at least similar uh regulation on cryptocurrency as well. There are many cryptocurrency services that are incredible to work with and are very helpful to law enforcement. They don't want to see their platforms being used to victimize people. But at the same time, many of them are not obligated to cooperate like a bank is either. So at any point, they could just say no. But now on, on the flip side, the exchanges that are overseas, it's kind of 50/50. Some of them are very cooperative with us, and others you know they just say, go through the, there's what's called an MLAD, it's a Mutual Legal Assistance Treaty. It, it's essentially a very formal process to go through the, the Department of Justice in Washington DC and make formal requests to other countries. I, I can tell you this sort of process takes months. If I trace cryptocurrency to a wallet in the Seychelles or Lithuania, those funds aren't going to be there six months later. That is a huge obstacle for us. Yeah, when it comes to cryptocurrency, it's just a borderless type of currency or property. It doesn't have the same restrictions and hurdles. Even if I wanted to do a bank wire to someone in Germany for example, that's probably going to take a few days to go through, and at any point my bank could say no. If I create a wallet on my phone right now, I could send cryptocurrency to someone in Germany within seconds. There's no third-party saying no. So it, it's definitely a problem.

[00:43:04] Bob: And as you have pointed out, if it takes months to work with a foreign exchange, but the criminals are moving money within seconds, that's just not a fair fight, right?

[00:43:13] Det. Simons: Absolutely not at all. But, but again, I don't want to paint the picture that all overseas exchanges are like that. I have frozen and recovered cryptocurrency from numerous overseas exchanges. It's just at any point they could stop doing that also.

[00:43:32] Bob: And it's, it must be fairly trivial for the criminals to figure out pretty quickly which exchanges work with law enforcement, and which, which don't, or which, or at least delayed, that seems to me like only the bad criminals get caught here.

[00:43:46] Det. Simons: Yeah, that, that definitely happens. I won't name any specific exchanges, but yes, there, there are some that we all know of, we know those particular countries, they won't let services cooperate. The services don't want to cooperate. So yes, we do see those repeatedly.

[00:44:04] Bob: Paul certainly sees Detective Simons as a hero, even though the detective refuses that title.

[00:44:11] Det. Scott Simons: An--, anything we can do to help the victim, yes. I don't know if I'd call myself a hero for that, but yes. But yet there's just, there's so many steps that need to occur to make these cases successful. And again, it's not just law enforcement, but I'm seeing the private sector step up and do better, banks, credit unions, the financial industry. Not perfect by any means, but there are many who are trying to do better. Banks, right off the bat, could catch customers pulling out $50,000 in cash at a time. They could see these red flags of transferring $100,000 to their crypto exchange. We can do better at educating potential victims so they don't even fall for these scams, or if they do fall for the scams, they need to feel comfortable and not ashamed to report these immediately. The sooner they get reported the, the better our chances are of helping the victims. And then once they do report it to the police, us as law enforcement, we need to do a better job to get these cases in the hands of whichever investigator or crypto tracer needs to get that case. I see so many cases where it, the initial officer takes the report, and then it's three days, five days, a week before it ever makes it to an investigator, and there's even a good chance that investigator is not familiar enough with cryptocurrency. When, when you start waiting days or weeks, that sets us behind.

[00:45:46] Bob: Another big hurdle Detective Simons is trying to overcome, lack of training and support for local police fighting crypto crimes.

[00:45:56] Bob: Certainly not every department has someone who is an expert in crypto, right? Or my understanding is you're trying to do something about that, right?

[00:46:02] Det. Simons: It, yeah, you're absolutely right. A lot of these resources and tracing tools, now don't get me wrong, there are a lot of free tools out there. But just like any other product, that something that you can get for free, typically is not going to ha--, have the same capabilities as something you're spending money for. So the better tracing tools and other analytics tools that we can use, they're expensive. To, to get state and especially local police departments to be able to afford these, we're getting creative. Maybe a few agencies can go in on it together, start a task force, maybe a district, through the district attorney's office, so there's different ways law enforcement is getting creative. But when you're looking, especially a small or medium-sized department, and having to spend 15 to $30,000 a year on something like this, it, it's expensive. And then that's just the tool. Now you have to devote some investigators to it, and training is expensive.

[00:47:10] Bob: And also in the air, and I realize this is less and less, thank goodness, but, but for a long time there's been this feeling of, you sent the money, so you know, are you really a victim? And also, we're busy. So you're not a priority to us. So that's in the soup too, isn't it?

[00:47:26] Det. Simons: Absolutely. And you are right, we hear that less, fortunately we hear that much less, but it's still out there. But just like any other crime where a victim is deceived, it's a crime. That the deception is literally the element to the crime, that, that makes them a victim and we need to help them.

[00:47:46] Bob: As for advice to consumers, Detective Simons says it does come down to something pretty straightforward.

[00:47:55] Det. Scott Simons: Never send someone you've never met in person cryptocurrency or any other form of money. Please do not. If, the first thing I would do is talk to friends and family and see what they think. You are always welcome to drive to your local law enforcement agency. If you're not able to get there, pick up the phone and ask to speak to an officer. Explain to them what's going on, and we will give you our best guidance on your particular, of course it's case by case, but there is a very good chance of someone you've never met is asking you for cryptocurrency. If it's social media, if it's gone to a messaging application like Telegram or WhatsApp or Signal, email, even LinkedIn, if... dating apps, there is a form of communication, I guarantee you the scammers are there.

[00:48:48] Bob: Is there anything else that you want Perfect Scam listeners to know about cryptocurrency, about investigations into crypto crimes, or just generally about staying safe when they're online?

[00:48:59] Det. Simons: Don't be afraid to ask questions. Don't, please don't be ashamed. It's absolutely not your fault. I hear that from victims all the time. These scammers, this is what they do. This is their profession. They study human psychology, they know what to say, they know who to say it to; don't be ashamed. I guarantee you, you are not the only one. So please, talk to your friends and family if you think you, you have become a victim of one of these scams. Contact your law enforcement agency immediately. If you don't think you're getting the service that you need, I, there's more of us out here that can help.

[00:49:42] Bob: As for Paul, he's doing better. The $80,000 sure helped and there's a chance he might ultimately be able to recover another set of stolen crypto. But somehow the criminals are still watching him.

[00:49:57] Bob: My understanding is that the criminals actually reached out to you as recently as a couple of days ago?

[00:50:01] Paul: I know, this is so, they have audacity to do that, and I think I know why they did it, because for some of the funds I was moving through like a Swan exchange, so I'm assuming that they basically definitely know my wallet, my, my bitcoin wallet and cost, and then recently I just had some, not much money, but I sent some funds to that wallet so because I needed to send them to my friend and stuff like that. So not a big sum, but like the next day they, they texted me through, from different phone number, but I tried this phone number. It's also New--, and they're all registered there as New York phone numbers and stuff like that. And that person's saying, "Hey, if you remember me, that's me. Sorry that I did it to you. Yeah, I was forced to do that. Now I have an opportunity to escape this place. I just, they just want me to pay some hefty money, to get out." So to me, it's a gap I guess in, in our system, and I don't know all the intricacies in how that works, but apparently, they just feel so safe that nobody will be able to peg them and find them that it's just amazing.

[00:51:08] Bob: I think you have put it to so well. They feel like there's literally no risk.

[00:51:12] Paul: Right. Exactly.

[00:51:13] Bob: Yeah, what is it that you want people to hear in listening to your story? What do you want them to learn from it?

[00:51:21] Paul: I guess probably the biggest things, if you're, if you know that you're in tough situation psychologically, make sure you have support next to you and people that you can talk to that you can trust, right. Because there was not in my case. I was by myself, so that's, you just need to make sure that you have somebody you can talk to and people that you can trust. And the second thing, we live in a world of technologies and most communications apparently are done through text or calls, but I still think that if you're talking about relationships, it has to be in person. Now after that, after, only once I went through that, I was sitting there and thinking why it happened and how it happened and I just came to realize that this, it's so easy to fool you and to lie while online, right. 'Cause you don't see the eyes of the, that person, you don't see, and they make themselves perfect, right? They make themselves without a flaw. You think they are healthy, they are strong, they're rich, and they don't have any problems in their life. They make their life look perfect, but it's only possible if your interaction is online, right, or virtual. I feel I would tell other people just, no matter what relationships you're getting yourself into, make sure it's, it's done in person. So.

[00:52:45] Bob: Gosh 38 and three, three young kids by yourself. Anybody would understand what a difficult position you were in.

[00:52:52] Paul: Yeah, yeah, but it's okay, and like I said, I'm getting over it by now.

[00:52:56] Bob: I hope talking about it helps a little bit. I know it will help other people. You've done a really big service here.

[00:53:01] Paul: Yeah, yeah, I'm, I'm glad to do that. I hope other people will listen to that and will be more careful with their interactions online and just in generally Scam is everywhere apparently. Everybody is trying to scam you. It appears like that, you know, unfortunately.

[00:53:19] Bob: For The Perfect Scam, I'm Bob Sullivan.

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[00:53:32] Bob: If you have been targeted by a scam or fraud, you're not alone. Call the AARP Fraud Watch Network Helpline at 877-908-3360. Their trained fraud specialists can provide you with free support and guidance on what to do next. To learn more about the Fraud Watch Network volunteers and the fraud survivors they've helped, check out the new video series, Fraud Wars, on AARP's YouTube channel. Our email address at The Perfect Scam is: theperfectscampodcast@aarp.org, and we want to hear from you. If you've been the victim of a scam or you know someone who has, and you'd like us to tell their story, write to us. That address again is: theperfectscampodcast@aarp.org. Thank you to our team of scambusters; Associate Producer, Annalea Embree; Researcher, Becky Dodson; Executive Producer, Julie Getz; and our Audio Engineer and Sound Designer, Julio Gonzalez. Be sure to find us on Apple Podcasts, Spotify, or wherever you listen to podcasts. For AARP's The Perfect Scam, I'm Bob Sullivan.

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