CertiK, a blockchain security company, recently discovered that scammers have been accessing a “cheap and easy” black market identity to place their names and face on fraudulent projects.
“Professional KYC actors” are described by CertiK as those who voluntarily become the verified face of crypto projects, gaining trust in the community before an “insider hack” or an “exit scam.”
Scammers use KYC as an identity to open crypto exchange accounts on behalf of the original identity holders.
During November, CertiK judges found over 20 underground marketplaces that recruit KYC players.
These marketplaces use Telegram, Discord, mobile apps, and gig websites to recruit them for as little as $8.00 for simple “gigs,” like passing the KYC needs for opening a bank account.
Original Identity players who put their names and face on scam projects are more expensive. A study by CertiK notes that most actors are paid about $20 to $30 for roles and are based in developing countries.
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Scammers living in countries considered to be low-risk money laundering jurisdictions may be able to command even higher prices if they have more complex requirements or verification processes.
According to CertiK, scammers could earn up to $500 a week as CEOs of malicious projects. Still, the market for scammers was “marginal” compared to that for already KYCed accounts at banks and cryptocurrency exchanges.
CertiK calculated that more than 500,000 members were buyers and sellers on these black markets. These marketplace sizes range from 4,000 to 300,000, with crypto to fiat conversions accounting for significant transactions on these marketplaces.
According to CertiK, over 40 websites offering KYC badges and vetting crypto projects are unreliable because the procedures used to identify fraud are too superficial or too well-developed to detect insider threats.
Scammers then leverage these badges to mislead the community and investors since the teams behind these websites lack the needed “investigation methodology, training, and experience.”
Despite the industry’s efforts, however, crypto scammers are gaining ground. As part of its efforts to help detect and prevent fraud, traditional finance giant Mastercard released a tool in October that combines artificial intelligence with blockchain data.
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Blockchain transactions are open, contrary to popular belief, making it harder for fraudsters to hide their activities. Another recent example is the finding and charging of five people through phishing scams of nonfungible tokens (NFT) stolen from French authorities.