Romance Scams: A $1B Valentine’s Nightmare

Valentine’s Day serves as a reminder that those seeking love online are susceptible to falling victim to scams. The online dating industry is projected to generate $3.1 billion by 2024, with an estimated 440 million users by 2027. Security and analytics firms have observed an increase in romance scams, according to a report by Binance’s security and compliance department. Norton’s 2023 Cyber Safety Insights report reveals that one in every four adults globally has been lured into an online dating or romance scam. In 2016, the US Federal Trade Commission received 11,235 complaints about dating and romance scams, but this number soared to around 70,000 reports in 2022, resulting in $1.3 billion in losses for unsuspecting individuals seeking love.

While cash is still the primary method for global money laundering, cryptocurrency payments make up 34% of reported losses in romance scams. Binance’s internal data from 2023 suggests that romance scams accounted for 2% of total reported cases, with an average loss of $14,000 per victim. Tigran Gambaryan, Binance’s head of financial crime compliance and former US IRS investigator, draws parallels between romance scammers and financial fraudsters. He emphasizes the exploitation of trust and the fabrication of connections to deceive victims.

Binance’s global head of intelligence and investigations shares several anecdotal cases the team has dealt with. One victim lost $100,000 to a scammer who used Tinder to establish contact and gradually extracted money from them. Another individual encountered a cryptocurrency trader on a social media platform, building trust over a few months through direct messages and phone calls. The victim ultimately sent $500,000 worth of cryptocurrencies to the scammer before all communication ceased. Binance aided law enforcement agencies, recovering $200,000 of the victim’s funds.

Pig-butchering has emerged as a concerning trend in online fraud, according to various security firms and law enforcement agencies. Sophos’ research conducted in January 2024 suggests that pig-butchering is one of the fastest-growing segments of fraudulent cryptocurrency-related investment schemes, resulting in billions of dollars lost by US victims. Scammers are also utilizing decentralized applications and protocols in the decentralized finance (DeFi) space to defraud victims once trust is established. These platforms enable scammers to bypass traditional obstacles, allowing victims to transfer funds directly, leading to potential losses when connecting a Web3 wallet to a malicious contract.