The Central Bank of Russia has warned about the rising number of financial frauds using cryptocurrencies to attract victims or receive payments. The central bank said that in 2023, almost all of the pyramid schemes and illegal brokers it detected involved crypto in some way.
The Central Bank of Russia report defines pyramid schemes as “fake investment projects” mostly online, spreading through Telegram and social media. In 2023, it identified 5,733 entities showing signs of illegal activities – 2,944 were pyramid schemes. This was an increase of 927 from the year before.
The report said, nearly 1,500 schemes accepted digital assets payments – the most common form of payment among those the bank uncovered and the number of illegal financial market players using crypto themes is growing.
Alongside pyramid schemes, illegal brokers and dealers also greatly favor digital assets. These entities offered investments in scam tokens or accepted virtual currency payments without licenses or registrations, ignoring legal requirements for financial middlemen.
The Central Bank worked with the Federal Antimonopoly Service and internet censor Roskomnadzor to block over 11,200 websites of illegal financial market participants and pyramid scheme operators.
Global Crypto Scams Fall, But Sanctions Breaches Rise
While crypto-related fraud increased in Russia, global trends moved the other way. US pyramid scheme research group Ponzi Tracker found the share of fraudulent investment programs significantly involving crypto fell from over 25% in 2022 to around 15% in 2023.
Likewise, Chainalysis showed global revenue from crypto scams dropped 29.2% year-on-year, part of an overall decline in crypto crime. However, sanctions breaches were one of the few crime categories to increase in 2023 – with Russian entities driving much of this illegal activity.
While warning the public about crypto scam risks, the Russian government also took action to combat financial crimes overall. In 2023, the Central Bank initiated over 125 criminal cases and 620 administrative cases against alleged fraudsters.
The Central Bank urged the public to be vigilant and cautious about financial offers involving digital assets or promising high returns. It advised checking the legitimacy and reputation of any financial entity before making transactions.
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