The role of cryptocurrency in fraud

By Jessica Salerno-Shumaker, OSCPA senior content manager  

Ignoring cryptocurrency could mean ignoring the signs of fraud, said one forensics expert.  

“Cryptocurrency is real and has a tangible value,” said Paul Sibenik, CEO of Cryptoforensic Investigators. “It's not funny money, and in some cases is used to facilitate fraud.”  

While a majority of cryptocurrency is legitimate, Sibenik said it can be used for scams such as ransomware because it's an effective tool, and “it's an effective way to transmit value or transmit money across international borders in a largely irreversible way to a synonymous person.”  

One of the most common types of fraud is something called a “pig butchering” scam, where a fraudster reaches out to someone and slowly begins building a relationship with the victim. Sometimes this relationship is romantic, sometimes platonic, but it’s a typical “long con,” said Sibenik, and involves the victim gradually increasing payments to a fraudulent organization.   

“They build an extensive amount of rapport before they suggest the victim try a website to use for investing,” he said. “But the reality is that everything is fraudulent, and the fraudster is just using that person as a pawn on a large level syndicate.” 

Sibenik spoke at the Fraud and Forensics Conference in August, and said it’s critical that accountants understand how cryptocurrency holdings are managed and signs of embezzlement or misappropriation.  

“Find any inconsistencies in what’s being reported,” he said. 

While the future of AI altering what fraud looks like for criminals is concerning, Sibenik said focusing on basic best practices should be enough for now.  

“Have a good knowledge of cyber security practices and that will help in the vast majority of instances,” he said. “Usually when people lose money it's rarely due to some highly intricate scheme. It's usually just something relatively simple, such as phishing. Make sure you have a good understanding of how to detect spoof domains, spoofed emails and things like that.”