A United States District Court has ordered the forfeiture of $125,000 worth of cryptocurrency funds recovered from the Binance accounts of three Nigerians, stolen from an American victim via a Telegram scam staged in 2021. The legal action comes amid months of waiting for the Nigerians to claim the assets.
According to a judgment delivered by the Eastern District of Tennessee in Chattanooga on April 30, the crypto assets were seized from three Binance accounts linked to Nigerian citizens, namely Martins Eromosele Iyere, Moses Olumide Sokale, and Olawumi Stephen Adewale, who defrauded a Tennessee resident, Matthew McNulty, in 2021.
According to the court’s documents and a detailed report submitted by FBI Agent Jordan Foreman, Mr. McNulty was tricked into entering his login details on a fraudulent website hosted in Nigeria. The scammers then transferred his crypto funds out of his wallet. The documents added that the assets were converted into different types of cryptocurrencies and transferred to various wallets before ending up in the Binance accounts.
Afterwards, the FBI initiated several efforts to recover the funds and the stolen funds were traced using “open-source methods”.
“The pattern of withdrawals, transfers, and transactions is consistent with money laundering and attempts to conceal proceeds of fraud,” Mr Foreman added.
The court held that the government’s evidence established a clear link between the seized assets and the alleged wire fraud and money laundering. After establishing a convincing link between the seized crypto assets and the allegedly fraudulent funds, the US government said that every effort to contact Iyere, Sokale, and Adewale about the seizure and forfeiture proceedings was unsuccessful.
“The government also posted a notice of forfeiture for 30 days on www.forfeiture.gov. No answers and verified complaints were timely filed and on 27 September 2024, the government moved for summary judgement. The government’s motion is now ripe,” the judge, Mr McDonough, stated before granting an order of forfeiture of the assets in favour of the US government.
After no claims were filed disputing the government’s allegations, the judge gave a summary judgment in favour of the US government, thereby affirming the final forfeiture of the assets.
How the crypto fraud was perpetrated
In an account by the U.S government’s filings while filing a report on how the fraudulent activity was orchestrated, Agent Foreman explained that Mr McNulty, a resident of Cleveland, Tennessee, posted a query on a Telegram channel called AnySwap on 12 February 2021, asking for help with a cryptocurrency trading error.
Thereafter, an account impersonating a legit Telegram community manager reached out to Mr McNulty, offering to help resolve the issue. Mr McNulty was directed by the scammer to enter his crypto login details into a website registered and hosted in Nigeria.
Thereafter, the website generated a QR code as soon as Mr McNulty entered his credentials, and the scammer then asked the victim to screenshot the QR code and send it to him. After he complied, the scammer immediately transferred his cryptocurrencies out of his wallet. The stolen funds were then laundered across various crypto wallets before being transferred into a Binance account linked to the three Nigerians – Messrs Iyere, Sokale, and Adewale.
As the world continues to embrace cryptocurrency amid the prevalence of the currency being the future of financial transactions, its vulnerability to fraudulent activities has often remained a global concern.
A 2024 report by the Federal Bureau of Investigation (FBI) in its 2023 Cryptocurrency Fraud Report expressed that the agency’s Internet Crime Complaint Centre received more than 69,000 complaints from the public regarding cyber-enabled crime and financial fraud involving the use of cryptocurrency, with over $5.6 billion in reported losses. This represented a 45 per cent increase compared to the 2022 figure.
Another 2024 report by blockchain research firm Chainalysis revealed that crypto wallets linked to scams received $9.9 billion in cryptocurrency in 2024, according to its initial estimates, and predicted that 2024’s figure will grow to a record of $12.4 billion as it continues to identify more scam wallets. Chainalysis added that its yearly estimates of scam activity have risen by an average of 24 per cent between annual reporting periods since 2020.
In addition, Elad Fouks, head of fraud products at Chainalysis and co-founder of fraud-detection app Alterya, asserted that generative AI can be used to amplify and scale up crypto fraud and crimes. He then warned that the potential of AI technology to scale crypto scams exponentially further adds to the challenges associated with combating those crimes.
“GenAI enables the generation of realistic fake content, including websites and listings, to power investment scams, purchase scams, and make these attacks more convincing and harder to detect,” he added
In his final submission, Fouks suggested that tackling crypto scams at scale will require sustained efforts from government agencies, regulators, and organisations, and those efforts must be concerned and genuine in order to clamp the fast-growing fraudulent activity.
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