The high-stakes poker party that turned out to be a crypto scam

All it takes is an anonymous wallet to scam crypto millionaires out of their money. In January, more than a hundred people gathered at a Puerto Rican billionaire’s mansion with the intent of making big money. Fellow billionaires, cryptocurrency founders, and high-powered tech executives mingled in formal attire over poolside cocktails and hors d’oeuvres. They put up $80,000 apiece to buy into a high-stakes private poker game. Some played at a $2 million cash table.

Despite the high-profile guests, the event turned out to be a disaster. The buy-in money was managed in a cryptocurrency wallet, and whoever managed that wallet soon disappeared with the $5 million pot—all in untraceable cryptocurrency. Everyone who put up money lost it, and those who won never got to take home their winnings.

The wealthy players, including five people from Utah, had long touted the virtues of cryptocurrency and blockchain—run on decentralized platforms that are secure and private. Now they found themselves flabbergasted. None of them, many of whom run crypto funds, wanted to speak on the record about the scam.

The Puerto Rico fraud is among a long list of crypto cons running rampant across the world, duping even the brightest minds and most successful people in the burgeoning cryptocurrency industry.

According to a new analysis by the Federal Trade Commission, consumers have lost more than $1 billion from cryptocurrency fraud from January 2021 through March 2022, which suggests that cryptocurrency is quickly becoming the payment of choice for many scammers. An average of one out of every four dollars is reported lost to fraud paid in cryptocurrency.

Blame the hype around the sector; Bitcoin, Dogecoin, and Etherium deals have created a huge number of millionaires in the past couple of years. Americans earned $4 billion from crypto last year, according to a report by software company Chainalysis . The markets began to crash last spring, but plenty of people still see cryptocurrency with dollar signs in their eyes.

“Everyone wants to get rich quick, and a lot of people will take your money,” says Scott Paul, founder of Utah-based Convoi Ventures, which provides pre-seed funding to crypto startups .

Fraudsters love crypto because the scams are harder to track and decentralized. Many of these scams start with an ad, post, or message on a social media platform promising guaranteed profits or requiring participants to buy or pay in crypto, according to the FTC. Others involve a love interest who wants to show you how to invest in cryptocurrency or to send them cryptocurrency.

These scams often falsely promise potential investors that they can earn huge returns by investing in their cryptocurrency schemes, but people report losing all the money they “invest.”

This spring, a Utah woman lost nearly $200,000 to a man she met on a dating site who promised to invest her money in crypto. Another man from Jordan says he lost several hundred thousand dollars after he “invested” that money in crypto—it turned out he was using a look-alike crypto app that gave a hacker access to his digital wallet. Another woman, Crystal Racassi of Price , says she lost hundreds of dollars last fall after a girl reached out to her on Facebook. A UK company told her to put $300 into Coinbase, a cryptocurrency app, and to send those funds to the company. She never got the initial investment back and was told she had to pay a fee to withdraw her money.

According to the FTC, people aged 20 to 49 are five times more likely than older people to report losing money to a cryptocurrency investment scam. Within a six-month period last year, people in their 20s and 30s lost more money to investment scams than any other form of fraud. More than half of their investment scam losses were in cryptocurrency.

As evidenced by the aforementioned poker game, even experienced crypto investors have been duped by crypto rug pulls. National media outlets touted the Squid Game Token last year, which looked compelling on the surface: People would buy their tokens and invest in projects with the potential for significant returns. Instead, investors unknowingly permitted people to take tokens out of their wallets indefinitely.

Last fall, the Squid Game Token creators removed the $3.36 million that had been invested into the coin, making it worthless. Even after the token went out of business, the scammers had access to people’s wallets and took even more money, says Dan Young, an early Bitcoin miner in Salt Lake City, founder of Xidax PCs, and the founder of Ugly Unicorn Fund, […]

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