Hong Kong Police Bust Group Running $46M Crypto Investment Scam Using Deepfakes

As a seasoned analyst with years of experience in financial crime investigations, I find this recent bust by Hong Kong police to be both alarming and intriguing. The scale and sophistication of this cryptocurrency scam operation are rare in Hong Kong, a city known for its financial transparency and rigorous regulatory framework.

In simple terms, authorities in Hong Kong have closed down an organization operating a $46.35 million cryptocurrency swindle from an office located in Hung Hom district.

Last week, a total of 27 individuals, aged between 21 and 34, were arrested on suspicion of conspiring to defraud and illegally possessing weapons, as reported at a police briefing held on October 14th. Among them were some who had graduated from local universities in digital media fields, while others are suspected to have ties with local criminal organizations like triads.

2023 saw a staggering increase in global financial losses from crypto investment frauds, reaching an astounding $3.96 billion – a 53% rise from the $2.57 billion experienced in 2022. The Internet Crime Complaint Center’s data suggests that this amount may actually be underestimated. Intriguingly, scams and frauds accounted for a substantial 43.9% of all reported crimes in Hong Kong during the first half of the year alone.

Although swindling operations like these are well-known in various parts of Southeast Asia, India, Dubai, and most recently, Sri Lanka, it’s uncommon to discover them in Hong Kong.

Yiu Wing-kin, head of the New Territories South Crime Headquarters, mentioned that it’s uncommon to discover a substantial, cross-border fraud operation that is meticulously organized, has a distinct division of labor, and maintains its physical presence in Hong Kong.

Although such incidents are not frequent, they do happen. In late August, authorities apprehended a gang consisting of six Malaysians and five local residents who were part of a HK$61 million ($7.8 million) phone scam ring. This organized crime group had established four bases of operation within Hong Kong.

In the recent raid, some training materials explaining the methods used in scams were found. These documents appear to be related to a type of scam known as “pig butchering,” where the group would approach potential victims on social media and attempt to establish romantic relationships with them. Once trust was established, they would convince their targets to invest in a fraudulent cryptocurrency platform.

Law enforcement officials reported that the group worked together with foreign fraudulent crypto-investment schemes and skilled IT professionals to create deceptive online platforms for investing in cryptocurrencies.