After being scammed for over $500,000, one man paid one such company $6,500 to recover his stolen savings. A year later, he’s received nothing — and he’s not alone.
Like countless other cryptocurrency scam victims, this southern California man’s story began the same way: an unsolicited text message from someone who said they had the wrong number in late 2021. Weeks of texts later, the man, who Forbes agreed to identify by one of his initials, “M,” realized that he had been conned, and had lost over $500,000 – 10 years worth of his financial savings.
Immediately, M went to his local police department, which he says declined to take a report, telling him to go to federal authorities instead.
After a few more weeks went by, M was feeling frustrated that his case wasn’t advancing quickly enough with conventional law enforcement. So he turned to CipherBlade, a company that claims to have recovered “millions of dollars of stolen cryptocurrency.” M signed a contract with the company, agreeing to pay $6,500 for “up to” 10 hours of work. If CipherBlade helped recover any of his money, they would also get 12.5% of that, too. But now, more than a year has passed, and M hasn’t gotten a dollar back.
“Practically all such private services require upfront payments regardless of the outcome. The reason is obvious: if they were to receive funds only when the victim actually recovers losses, most of them would be out of business very soon.”
Pig butchering, as it’s known, is a new type of online con perpetrated by overseas scammers who “fatten” up victims – making them believe they have made boatloads of money in cryptocurrency often using manipulated apps and websites – before absconding with all their money. Experts say billions of dollars are lost to this type of pernicious scheme each year.
The hard truth is that recovering money lost to crypto scams is extremely rare, even when law enforcement does take up a case. But in recent years, a nascent industry has cropped up, offering services that promise to do just that. These companies convince consumers to spend more money in order to recover their already-lost sums, with scant evidence that they regularly work as advertised.
Multiple U.S. financial and law enforcement agencies, including the Federal Trade Commission and the Commodity Futures Trading Commission, generally tell scam victims to treat these services with a healthy dose of skepticism. That’s because even if one of these companies is involved, law enforcement still has to do its own independent investigation — for which victims aren’t charged. Plus, no private company has the authority to compel the freezing, much less the seizure, of crypto assets held at an exchange.
“In reality, the services [such recovery firms] provide often don’t go much beyond what consumers can do themselves for free, such as filing a complaint with the [DFPI] or other regulatory or law enforcement agencies,” says a 2022 updated advisory from California’s Department of Financial Protection and Innovation.
Matthew Greene, the operations and finance head for CipherBlade, told Forbes via email that his company was an “exception to the general rule” that most such firms are fraudulent or inept.
Similarly, Max Handler, the vice president of Coin Dispute Network, said that while his competitors offer “a lot of junk,” he said his firm is a “trusted source for crypto expertise that people can turn to.”
However, Tony Moore, a detective with the Los Angeles County Sheriff’s Department who investigates cryptocurrency-related crimes, said he’s encountered at least a dozen scam victims who reported such crimes to his agency after they had already hired one of these companies. He says he recommends that victims don’t engage one.
“I always tell them no,” he told Forbes. “You’re going to pay them for what I’m already doing. They can’t seize. You’re going to waste your money for them to trace your money, when that’s what we do here.”
Forbes spoke with 11 former and prospective clients of five such firms, including CipherBlade, CNC Intelligence, Coin Dispute Network, and others, who said they had either paid thousands of dollars or were asked to pay a similar amount, and essentially got nothing for it.
In the case of CNC Intelligence, an Israeli-based company that claims to be “leading the asset and recovery industry,” Forbes reached out to a Colorado man who lost $1.6 million to pig butchering. He told Forbes that CNC has so far been unable to advance his case.
“The recovery process seems to be long and arduous,” he wrote. “I am hoping for the best but I don’t have much to say at this point.”
Despite the company’s advertising copy, Roman Garcia, the head of global investigations for CNC Intelligence, admitted that recoveries are somewhat rare.
“It’s somewhat unlikely that you’re ever going to get [money] back,” he said. The former FBI special agent told Forbes that successes were so rare, that he only knew of 10 successful cases “out of a couple hundred” in the nearly two years he had been with the company — despite the company’s own website’s bold claim that it provides “clients with the best value for their hard earned money.”
Even Binance, the world’s largest cryptocurrency exchange, has spoken out against these businesses.
“Practically all such private services require upfront payments regardless of the outcome,” the company wrote last year. “The reason is obvious: if they were to receive funds only when the victim actually recovers losses, most of them would be out of business very soon.”
Paul Sibenik, a lead case manager at CipherBlade, told Forbes that his company “has no ability to effectuate recovery by ourselves,” and that “we normally tell people to go into it with low expectations.”
But correspondence shared with Forbes between Sibenik and M made no mention of such “low expectations.” In fact, Sibenik told M that his case “isn’t all that complex from a forensics perspective.” M interpreted the statement to mean that by hiring CipherBlade he was improving his chances of recovery. But he still hasn’t seen a dime.
CipherBlade’s Greene further explained that the company doesn’t just take every case that comes through the door, and that it does not promise recovery. “We do the best we can and currently reject about two thirds of all inquiries on the grounds that we do not believe that engaging us will be worthwhile for the victim,” he wrote.
Greene added: “The total amount we have helped recover over the history of our firm far exceeds and is a multiple of the total amount we have ever been paid for our investigative work.”
He declined to say how much the firm has actually recovered.
Once the victim has engaged the company, signed a contract and paid several thousands of dollars, the victim then provides the firm with details of the crypto transactions. That data typically includes loss amounts, transaction IDs, wallet addresses and other related data. Company analysts take that information and put it into commercially-available cryptocurrency tracing software, which then generates a diagram showing where the scammers moved the money. This tracing process usually takes a few hours or less.
“Typically if there is an ongoing law enforcement investigation, data is not shared to private parties because this could reveal all sorts of investigative strategies that are ongoing.”
Generally, the sooner the crime is reported to law enforcement, the higher the chances the cryptocurrency hasn’t been cashed out, and can possibly be traced to a specific exchange and potentially recovered. But these firms typically don’t have a particular superpower. In the case of CipherBlade, the company’s own website says that it uses Chainalysis, a well-known blockchain analytics firm already used by many law enforcement agencies. (Other recovery outfits use Chainalysis and similar blockchain forensics software made by rival firms.)
Chainalysis also allows anyone to take an online course for $800, earning a “certification.” (Chainalysis declined to confirm what it charges for an annual license, but the Global Anti-Scam Organization (GASO), a victims’ advocacy group, told Forbes that it received a quote from Chainalysis in 2022 for $40,000.) Other companies like the Blockchain Intelligence Group, which makes a program called Qlue, offers a comparable $999 program to become a “certified crypto investigator.” Blockchain Intelligence Group charged GASO $6,000 per year for its tool.
Regardless, many recovery firms are effectively reselling their access to these blockchain forensics tools. (Coin Dispute Network declined to explain its process, citing “the competitive nature of this new industry.”)
These tools produce a tree-like structure that allows investigators to trace the movement of the crypto, demonstrating how it went from a scam victim to their scammer’s account and then likely onto a cryptocurrency exchange. Once funds are traced to an exchange, there’s a chance of law enforcement obtaining “know your customer,” or KYC information, which could shed light on the identity of a possible criminal suspect.
From there, the investigator will take this diagram and use it to create a written report describing where the fraudulently-obtained crypto went. Such reports typically include details like phone numbers connected to the scammers, fake websites that were used in order to perpetrate the fraud, and cryptocurrency exchanges that facilitated the flow of money. Sometimes they explain how law enforcement might go about furthering the investigation.
In short, it’s a road map – but law enforcement is the only entity that can legally drive the journey forward. CipherBlade says that it provides “highly actionable reports for law enforcement, effectively serving them the case on a ‘silver platter.’”
“We find that providing a report that contains actionable intelligence has made law enforcement more inclined to further pursue a given case since that means some of the hour-intensive and technical work is out of the way,” Greene said via email.
But any law enforcement agency, whether local or federal, which has the capability to do its own crypto tracing will do so, without relying on an outside firm, and without charging the victim any money.
Shawn Bradstreet, the special agent in charge for the United States Secret Service San Francisco Field Office, told Forbes that his agency “cannot rely on such third party firms’ analysis” when investigating a crypto scam.
CipherBlade declined to connect Forbes with any law enforcement agencies that it claims to have developed relationships with. Greene further told Forbes via email that sharing contact information would be “in conflict” with law enforcement’s “professional objectives.”
Similarly, Matthew Stern, CNC Intelligence’s CEO and cofounder, emailed Forbes to say that the company “forms partnerships with law enforcement here in the U.S. and abroad to limit the damage these harmful scams cause innocent people.”
However, he too declined to name any specific American law enforcement agencies that the company has worked with.
CipherBlade did connect Forbes with two satisfied customers – one in North Dakota, and another in Saudi Arabia. Both men, whose identities are known to Forbes, said that they were grateful for the company’s services. They say CipherBlade helped them recover pilfered crypto from hackers who had tricked them into giving up their login credentials.
In the case of the victim in Saudi Arabia, whom Forbes is identifying as “H,” he lost approximately $150,000 worth of crypto assets in 2021 after being tricked into giving up his username and password to his online account. After CipherBlade did its analysis: identifying that his stolen funds had ended up at Binance – he said he ultimately was able to recover his stolen sum, minus its $5,000 fee and a 12% cut of the $150,000 lost – in a matter of weeks.
Erin Fracolli, Binance’s head of intelligence and investigations for the Americas, told Forbes that in this instance, the company did its own investigation after being alerted by CipherBlade, froze the account in question and confronted the suspected scammer. Highly unusually, she said, the scammer offered to return the stolen funds.
“That is not something we see every day,” she told Forbes, pointing out that that outcome in this case likely would have been the same had a law enforcement agency (as opposed to CipherBlade) identified Binance as holding suspected stolen funds.
In other words, CipherBlade itself seemingly didn’t do much to help recover the funds – the thief strangely just did the right thing. Typically, Binance’s website says it does “not process requests coming from private investigators without involvement from law enforcement or a legitimate legal request.”
Sometimes, such recovery firms ask law enforcement agencies to hand over the KYC information: a name, address, phone number, and other personal details of an account involved in the scheme. These details likely would not point to the ultimate mastermind, as scammers use numerous accounts to steal, launder, and cash out stolen funds.
Still, handing over such confidential information is not something that law enforcement or cryptocurrency exchanges typically do. Legal experts say it is highly unusual also for law enforcement to give up any kind of investigatory information to a victim of crime, much less to a private company.
“Typically if there is an ongoing law enforcement investigation, data is not shared to private parties because this could reveal all sorts of investigative strategies that are ongoing,” said Mary Fan, a law professor at the University of Washington. “The government doesn’t want to incur liability for what some loose cannons might do.”
Back in California, in M’s case, he was given a 21-page report that outlines how a law enforcement agency might file a subpoena to Binance or other companies that were used to further the scheme as a way to uncover a possible perpetrator.
M told Forbes that he does not know the status of any investigation looking into his losses, or if he has a chance of recovering any money. Plus, given that federal agencies cannot rely on the analysis provided by firms like CipherBlade, M is left unsure of what exactly he paid for.
“[CipherBlade is] taking advantage of someone who is already in a dire situation,” he said.
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