Fraud, Security, Scams, SIM Swap

Vigilance is often touted as the first line of defense in the world of crypto. But for many, even the most guarded practices can falter in the face of emerging threats. Consider one unsettling story of a crypto investor who became a victim during a routine red-eye flight.

Minutes after he boarded, his phone went dark — a typical indicator of signal loss mid-air. But this time, there was something more sinister at play. By the time he landed, his crypto wallet had been drained, and he discovered that someone, taking advantage of his time offline, had hijacked his phone number to gain control of his crypto exchange account.

SIM swap scams, as they’re commonly called, have gained traction in recent years, quietly preying on crypto holders with alarming success. The method is deceptively simple: by taking control of a victim’s phone number, scammers can bypass two-factor authentication measures and gain access to sensitive accounts.

According to the Federal Bureau of Investigation’s Internet Crime Complaint Center, this type of crime caused nearly $50 million loss across over a thousand cases in 2023. As more people become aware of the risks of traditional phishing, SIM swap attacks remain a silent but potent threat, capable of swiftly siphoning funds from unsuspecting victims.

How SIM swap attacks work

At the core of SIM swap attacks is a calculated manipulation of mobile carriers. Scammers begin by gathering personal information about their target — often scouring public records, social media and data breaches for details that help them impersonate the victim. Armed with this information, they contact the victim’s mobile carrier, posing as the account holder, and request a transfer of the phone number to a new SIM card in their possession.

Once the swap is complete, the scammers can intercept calls and messages meant for the victim, including two-factor authentication (2FA) codes that secure crypto wallets and other financial accounts. Within minutes, attackers can access sensitive accounts, draining assets and sometimes impersonating the victim to initiate further transactions with their contacts.

One high-profile case involves Brandon Buchanan, co-founder of the crypto investment fund Iterative Capital. Following a SIM swap, attackers impersonated Buchanan, reaching out to business associates with fake Bitcoin (BTC) deals. One associate, thinking he was dealing with Buchanan, transferred Bitcoin to a wallet controlled by the scammers, resulting in losses worth $450,000 at the time. This case underscores how SIM swap attacks can capitalize on trust, posing immense risks to individuals and their professional and financial networks.

Protecting against SIM swap scams

As the sophistication of these attacks grows, so does the need for equally advanced security measures.

SIM swap only works against 2FA codes sent via SMS. Using app-based authenticators would be a very robust defense against SIM swapping and should be used in preference.

However, as demonstrated, the SIM swap is devastating as it gives the hacker entire access to your phone, banking apps and email accounts. Consequently, high-risk individuals should consider having a separate phone number dedicated to 2FA.

One can also use proxy email addresses to sign up for accounts online so that one’s true email address is never divulged. The logic here is to have a separate email for each service that is forwarded to a central mailbox. If the true email is different on every site, an attacker would find it very hard to find the true email to log in to any service.

Regular personal risk assessment is also recommended. Sites like haveibeenpwned.com will let you know if your email address has been compromised.

In the case of financial institutions, it is advised that a range of preventative measures are adopted.

Multisignature wallets, which require multiple approvals for a transaction to proceed, add an extra layer of security against unauthorized access.

Ongoing education is also crucial; by training employees to recognize social engineering tactics and encouraging clients to use app-based authentication rather than SMS-based 2FA, institutions can better defend against SIM swap threats.

Additionally, robust monitoring systems like those offered by Crystal Intelligence are capable of flagging suspicious activity and offer a critical buffer, helping institutions detect and prevent unauthorized transactions at the earliest stages.

The role of blockchain intelligence in investigations

Blockchain intelligence solutions, such as those offered by blockchain intelligence firm Crystal Intelligence, allow businesses to manage risk and track crypto funds if a wallet has been compromised.

Crystal Intelligence’s blockchain analytics tools empower financial institutions and investigators to monitor crypto transactions in real time, track compromised wallets and identify suspicious patterns that may be indicative of fraud.

For compliance teams, Crystal Intelligence’s blockchain analytics tool Crystal Expert serves as an all-in-one tool that visually maps crypto transactions, offering critical insights into transaction flows and potential risks.

Covering over 3,800 digital assets and having flagged more than 6 million risky transfers, Crystal Intelligence’s system alerts compliance teams to abnormal transaction behaviors, allowing them to freeze funds or alert authorities. By recognizing the red flags of compromised wallets, institutions can respond swiftly, stopping scammers before they launder stolen assets.

Securing the future of crypto assets

While SIM swap scams may be a silent threat, they are far from unstoppable. With proactive steps and advanced technologies, the crypto community can effectively mitigate the risks. Crystal Intelligence advocates for industry-wide vigilance, emphasizing that as crypto adoption increases, so must security standards.

Blockchain intelligence solutions that enable real-time tracking and risk-based transaction assessment are essential for building a resilient crypto ecosystem. For individual investors and institutions, securing digital assets is a matter of fostering a mindset of continual awareness, not just adopting the latest tools.

As scams like SIM swaps evolve, the best defense lies in combining proactive measures with trusted blockchain analysis tools like Crystal Intelligence, ensuring that the crypto space remains a safe and thriving environment for all participants.

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