According to a recent Report The U.S. Drug Enforcement Administration (DEA) inadvertently transferred $50,000 worth of seized cryptocurrency to a hacker who amassed hundreds of thousands of Ethereum (ETH) over a period of months, Forbes reported.
Earlier this year, the U.S. Drug Enforcement Administration seized approximately $500,000 in Tether, a stablecoin pegged 1:1 to the U.S. dollar, from two Binance accounts allegedly involved in the illicit drug trade.
The funds are securely stored in DEA-controlled accounts and protected within Trezor hardware-based wallets in a “high security” facility. However, the agency’s vigilance was quickly undermined by a scammer exploiting a well-known cryptocurrency scam.
airdrop cryptocurrency scam
By closely monitoring the blockchain, the scammers saw a perfect opportunity when the DEA made a test payment of $45.36 in Tether to the US Marshals Service as part of the standard forfeiture process.
Seizing the moment, the scammers quickly set up a cryptocurrency address to “imitate” the bailiff’s account by matching the first five and last four characters.
Taking advantage of the common practice of copying and pasting lengthy encrypted addresses, the scammers used the “airdrop” method to place tokens into the DEA’s account, making it appear as a payment to the Marshals. So the DEA mistakenly sent over $55,000 to scammers in one transaction.
Immediately after discovering the fraudulent transaction, the Marshals alerted the DEA and launched a joint investigation with the FBI.
According to the report, it was revealed that the stolen funds were converted to Ethereum and transferred to a new wallet.
While the identity of the wallet owner remains unknown, investigators observed that two Binance accounts had been paying the scammers “gas fees,” which are fees for utilizing the computing power of the ethereum network.
Agents now rely on Google for potential leads through two Gmail addresses associated with Binance accounts.
follow the digital footprint
According to the report, an analysis of the scammers’ wallet transactions revealed significant activity. The wallet currently holds nearly $40,000 worth of ether, having seen $425,000 inflows since June.
Notably, up to $300,000 was distributed to seven different wallets over the past three weeks, further complicating efforts to track the funds and apprehend those responsible.
The DEA’s accidental loss of seized cryptocurrencies highlights the growing prevalence of cryptocurrency scams, which often exploit users’ reliance on the first and last characters of wallet addresses.
While tools like Chainaanalysis’ address screening can detect malicious addresses, it’s unclear whether the DEA is actively employing such measures to deal with crypto asset seizures.
However, as cybercriminals continue to exploit vulnerabilities in digital systems, agencies must adopt enhanced verification procedures and leverage advanced tools to combat crime and fraud risks.
The investigation into the high-profile case is still ongoing and it is hoped that the perpetrators will be identified and brought to justice, while spurring improved cybersecurity measures within law enforcement agencies.
Featured image via iStock, chart via TradingView.com
