Mei Mei Soe was using LinkedIn to find a new job when a friendly, fellow Chinese-speaker asked to connect. Mei Mei, 42, has suffered with debilitating nerve pain most of her adult life, and she was looking for an opportunity that would let her stay off her feet a bit more. Yanjun Li spent a few days getting to know Mei Mei, expressing a lot of sympathy about her pain, and then made a bold suggestion: Why not invest in crypto? Mei Mei knew nothing about cryptocurrency, but Yanjun offered to virtually hold her hand through the process.
She was skeptical, but dipped her toe into the crypto pool, buying $500 worth of Bitcoin. Then she followed Yanjun’s instructions, moving the digital cash onto another platform. Soon, it was worth more than $1,000. She transferred the money back to her bank account, proving to herself that the gains were real, and then she was hooked. Within a few weeks, she’d invested all her life savings — more than $100,000 — with Yanjun’s help. She also used her perfect credit score to secure another $150,000 in loans, and invested that, too. It was a big risk, but at this point, her account showed a balance of about $650,000.
A few weeks later, she tried to withdraw some of the money, and her whole world collapsed. The website that showed her $650,000 in crypto was fake; Yanjun was fake. The pain was very real. (CNBC first told the story of Mei Mei Soe)
In this special two-part episode of The Perfect Scam, we talk with Mei Mei Soe about her painful lesson in crypto investing. Then, we speak with three experts about the state of crypto scams, the history of crypto, and ponder what society can do to stop — or at least slow down — the runaway crypto scam train.
Cryptocurrency scams are skyrocketing so fast that consumer reported losses in 2021 were 60 times what they were in 2018. The Federal Trade Commission recently reported that crypto is now tops among payment methods used by victims who report a scam, more than gift cards, cash, credit cards, or any other payment tool. And the FTC says social media and crypto are a combustible combination.
Here’s a taste of what Duke University’s Lee Reiners told us about crypto scams (lightly edited for clarity):
“So when we look at crypto’s illicit use, there are really three categories. What you and I are talking about now falls under financial transactions associated with the commission of crimes. So you know, cryptocurrency just makes committing established crimes just a lot easier, and ransomware is the perfect example. Ransomware predates cryptocurrency. But, if we weren’t reading about it on the front page of The New York Times … pre-cryptocurrency, there were no Colonial Pipeline-style hacks. So your traditional romance scams .. cryptocurrency makes doing that a lot easier, and a lot easier to get away with.
“Then another category is money laundering and the shielding of legitimate activity from tax reporting or other legal requirements. So, because cryptocurrency, has that element of pseudonymity, and in some cases is fully anonymous, it’s easy to hide wealth. There are concerns that Russian oligarchs. for instance, are stashing some of their wealth in cryptocurrency. There are stories about couples in divorce proceedings hiding assets from one another in cryptocurrency.
“And then the final category is crimes such as theft, that are directly implicating the cryptocurrency marketplace itself. So these are new types of crimes that only cryptocurrency facilitates. Here I’m talking about hacks at cryptocurrency exchanges. North Korea has a state-sponsored hacking group, known as the Lazarus Group, and, they notoriously have gone after cryptocurrency exchanges and other cryptocurrency companies who have flaws in the code, lax security protocols, and have stolen crypto directly from these entities. So again, it’s just a perfect storm when it comes to crypto and criminal activity.”