A report highlights a growing trend of illegal financial market participants using cryptocurrencies.
The Bank of Russia, in its latest report, revealed a worrying increase in financial scams with cryptocurrency-related elements in 2023.
The number of entities involved in illegal activities, including financial pyramids, reportedly increased by 15.5% as compared to the previous year, reaching 5,735 identified cases.
Online Scams Soar as Cryptocurrencies Are in The Spotlight
The report highlights a growing trend of illegal financial market participants using cryptocurrencies. In 2022, one in two pseudo-investment projects involved cryptocurrencies, and by 2023, the bank claims that almost all financial pyramids and illegal brokers offered investments in domestic tokens or accepted cryptocurrency contributions.
According to the report, these scams operate primarily as “small pseudo-investment projects” created and conducted online. Its reach is amplified through social media and the messaging app Telegram, with organizers actively engaging “popular lifestyle bloggers” for advertising purposes.
Furthermore, foreign payment services and cryptocurrencies emerged as the most popular methods of transferring funds to these alleged pyramids. The report notes that more than 45% of identified scams encouraged investors to use foreign payment service systems.
At the same time, nearly 1,500 fraudulent projects accepted cryptocurrency contributions, allowing organizers and beneficiaries to maintain anonymity.
According to the Central Bank of Russia, scammers often create duplicate resources after blocking the main sites. In 2023, more than 1,500 financial pyramids had their domains and subdomains blocked through this mechanism.
Furthermore, almost 44% of illegal lenders advertised their services exclusively online, without physical offices, relying on social media pages, groups and popular advertising platforms.
To address the continued existence of these illegal activities, the Bank of Russia has taken measures to restrict access to domains and subdomains used by entities involved in illegal financial activities.
Crackdown on Illegal Financial Activities
The Bank of Russia also noted a decrease in the number of organizations providing loans against real estate, which indicates a downward trend in this sector.
Additionally, the regulator identified 820 illegal forex traders and 42 illegal brokers and managers. Many of these companies are alleged to attract customers by offering the illusion of bidding on foreign currency sites. Fabricated classifications, which mix legal participants with illegal entities, further mislead consumers. In 2023, the Bank of Russia identified 48 such sites.
To counter the activities of illegal organizations and financial pyramids, the Bank of Russia recommended that credit institutions apply anti-money laundering (AML) legislation to entities listed as involved in illegal activities in the financial market. These measures aim to reduce the lifespan of financial pyramids, prevent fundraising by illegal financial service providers, and minimize the harm caused to citizens by such schemes.
To enforce its efforts, the Russian Central Bank shares information on identified illegal participants and financial pyramids with law enforcement agencies, the Federal Antimonopoly Service of Russia (FAS Russia) and the Federal Service for Supervision of Communications, Information Technology and Media (Roskomnadzor).
As of 2023, the Bank of Russia’s actions have opened more than 125 criminal cases and more than 620 administrative cases and implemented more than 1,300 other response measures.
In addition, access to more than 11,200 online resources belonging to illegal participants and financial pyramids has been restricted.
By Audy Castaneda
