The United States Drug Enforcement Administration (DEA) has fallen prey to a cryptocurrency scam, resulting in the loss of over $50,000 in seized funds. This incident unfolded earlier this year and was recently brought to light through recent coverage by Forbes.
According to the report, the DEA found itself entangled in a common yet cunning cryptocurrency scam earlier this year. The agency had seized approximately $500,000 worth of Tether (USDT) stablecoin from two Binance accounts suspected of involvement in money laundering linked to drug proceeds.
In the process of handling the seized funds, the DEA allegedly made a critical mistake. During the forfeiture processing, the agency initiated a test transaction of around $45 in Tether to the cryptocurrency wallet address of the United States Marshals Service, a routine procedure. This transaction inadvertently caught the attention of a crafty scammer lurking on the blockchain.
The DEA Falls for the “Address Poisoning” Scam
The scammer swiftly capitalized on the opportunity opened by the DEA’s test transaction. Using a scam tactic known as “address poisoning,” the fraudster created a counterfeit Tether address that mimicked the first five and last four characters of the genuine Marshals’ account address.
This trick exploited a common human tendency to rely on the initial and final characters of an address, often overlooking the entire string of characters. Meanwhile, the co-founder of Binance, CZ, once warned against this type of crypto scam, as recently reported by Crypto Economy.
With the fake address in hand, the scammer orchestrated an “airdrop” to the DEA’s cryptocurrency wallet. This maneuver created the appearance of a legitimate recent transaction involving the Marshals’ address, tricking the DEA agent into transferring a substantial sum of funds to the scammer’s address. The agency unknowingly sent over $55,000 to the fraudster in a single transaction.
By the time the DEA and the Marshals realized the scam, it was too late. The ill-gotten Tether stablecoin had already been converted into other cryptocurrencies, including Ether (ETH) and Bitcoin (BTC), and moved across various crypto wallets. The scammer successfully evaded authorities’ efforts to freeze the funds.
Moreover, efforts to trace the scammer’s identity led investigators to discover that two Binance accounts had been associated with paying the scammer’s gas fees and necessary charges for network usage on the Ethereum blockchain. These accounts were registered with Gmail email addresses, with investigators hoping that Google might hold crucial information about the culprits.
The DEA is actively investigating the situation with the help of the FBI. However, the perpetrators behind the scam remain unidentified at press time.