Blockchain Security Specialist CertiK Found New Scamming Technique

Hackers and cryptocurrency scammers could have discovered a new, simple technique to avoid being discovered. Blockchain security specialist CertiK revealed a group of available KYC actors that dishonest developers might employ to deceive crypto communities.

Basic KYC checks frequently frustrate law-abiding retail customers, but they do little to dissuade dedicated thieves from scamming victims and using their stolen money to smuggle other goods.

CertiK has unveiled an underground ring of KYC actors for hire, used by rogue developers to scam #Web3 communities.

From our conversation with a KYC actor, to our deep-dive investigation into their underground world.. The dark side of #KYC 👀👇https://t.co/Whza1Hd1HU

— CertiK (@CertiK) November 17, 2022

The CertiK’s inquiry shows that criminals have devised a number of strategies to get through routine checks, and the employment of a KYC actor is perhaps one of the most intriguing tricks discovered by it.

Following the discovery and identification of a KYC actor by CertiK’s investigators, the suspect consented to provide extensive information on the KYC actor industry and procedure.

This actor claims that hiring someone to do KYC for a fraudulent operation is shockingly inexpensive and easy. He revealed how he has been pretending to be a KYC for over three years and always passes a routine KYC check. 

Additionally, he sent connections to the specialized markets where he gets his illegal customers along with documentation of transactions for his KYC employment.

CertiK Founds 20 OTC Underground Markets

Given the actor’s information, the company performed a deep dive investigation into dark KYC markets. Multiple over-the-counter (OTC) maximum of 20 black markets for illicit goods and services were scanned, including posts found on Telegram, and Discord, as well as other low-requirement phone-based applications, with job postings, also investigated via gig websites.

According to the statement:

Rogue developers who prepare crypto scams also use these service to recruit KYC actors, but they represent a marginal activity percentage compared to the number of transactions for already-KYCed bank or exchange accounts, as well as direct crypto/fiat currency deals.

If an organization needs to bypass a simple KYC process like creating bank or exchange accounts from developing nations, they may hire one actor for as little as $8. There are also more complex jobs- such as playing the CEO of a cryptocurrency enterprise- that pay up to $500 per week.

Additionally, CertiK’s calculations show that these OTC markets are widely used across the world, with a substantial concentration in Southeast Asia and membership levels ranging from 4,000 to 300,000. A staggering 500,000 people are also involved in these illegal cash trades, either buying or selling.

CertiK Thinks “KYC badges” Are Worthless

In their interview and the ensuing investigation into the black market, it became evident that KYC actors were not hired to safeguard investors’ financial security or privacy but rather to steal their money.

Thousands of people are signing up for so-called KYC (Know Your Customer) badges, which some websites offer to vet and rank cryptocurrency projects. Recent statistics show that more than 40 such sites have been launched so far and they’ve handed out 2,000 or so certificates among them.

Blockchain security specialist CertiK belived that:

The sad reality is that the majority of these improvised verification services are worthless, because they are either too superficial to detect fraud or simply too amateur to detect insider threats, with the KYC teams missing the necessary background investigation methodology, training and experience.

The company claims that this can have extremely significant repercussions since fraudulent teams can simply get through their verification procedure, use these shaky KYC credentials to deceive and swindle more investors, and avoid punishment for their crimes.

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