HARTFORD — The emerging market for the virtual cryptocurrency, available at more than 500 kiosks in Connecticut, is ripe for scams that have stolen millions of dollars from state residents, most of whom are over 60 years of age in what is an unregulated, hard-to-trace criminal landscape, State Police warn.
One consumer from eastern Connecticut has lost more than $6 million and the thieves might be from out of the United States, said a State Police investigator who admitted that the financial crimes often require time-consuming research and court-approved search warrants as thieves try to evade detection in a trend of criminal activity that has increased over the last seven years or so.
Speaking to the legislative Banking Committee, Det. Matthew Hogan of the State Police Eastern District Major Crime Squad painted a picture of a partially regulated industry where the hundreds of kiosks, not connected with traditional banks that have automatic teller machines, can become crime scenes where victims typically lose thousands of dollars or more in crooked transactions that are tough to track down.
“Luckily, we were able to locate and seize some of these stolen assets using our tracing software,” Hogan said. The kiosks, operated by about 20 different companies, allow consumers to pay cash for virtual currencies such as Bitcoin, which is supposed to be transferred to a consumer’s digital wallet, Hogan said, stressing that photo ID is only required if transactions exceed $3,000.
“The trail always exists, it’s going to be there forever,” Hogan said in remote testimony from his office to lawmakers in the Legislative Office Building. “The question is whether or not we can get to the assets quick enough to potentially seize and return them to the victim. So by the time we get through a search warrant process, a lot of times this money has moved three or four hops to a wallet that is now overseas with an entity (where) we have no jurisdiction. Luckily for us there are some of these exchanges who are cooperative with U.S. law enforcement strictly on letterhead, but that number is fleeting.”
Crypto hackers stole about $3.8 billion nationally last year. The higher the amount of individual thefts, the more-sophisticated are the hackers, Hogan said. “They’ll do as many different layering techniques in the money-laundering process to obfuscate where they’re putting the money,” Hogan said. “They’ll bridge it with other tokens. They’ll move it to other block chains. “They’ll change it to other things to make it more confusing for us.”
Hogan supported proposed legislation that would authorize the state Department of Banking to create some new regulations on the sale of digital assets, rescind others and even define common industry terms including “virtual currency address,” “virtual currency kiosk” and “virtual currency wallet.” The more than $6 million stolen from eastern Connecticut has yet to be recovered, Hogan said, stressing that many kiosks are located in areas of many cities near high-crime locations.
State Sen. Patricia Billie Miller, D-Stamford, co-chairman of the committee, asked Hogan what average consumers interested in virtual currency should do to avoid being scammed.
“Don’t use cryptocurrency ATM machines,” he said. “Between their transaction rates right now – between 11 and 25 percent – there’s really no reason to use them. If you’re a consumer and you want to purchase any kind of cryptocurrency, Bitcoin, Ethereum to any kind of token, you can easily open an account on Coinbase, Binance, Kucoin, any of these organizations and purchase them. There’s no reason to walk into the worst parts of a cities with cash in hand and transact on one of these ATM machines.”
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FILE – An advertisement of Bitcoin, one of the cryptocurrencies, is displayed on a building in Hong Kong, in a file photo. Connecticut State Police are currently investigating the theft of $6 million in virtual currency from an eastern Connecticut resident.
Kin Cheung / Associated Press
