FBI, Sen. Warren Issue Crypto Security Warning

The Federal Bureau of Investigation (FBI) issued a warning to cryptocurrency exchanges and digital asset owners about active security threats that may result in loss of assets. 

“Cybercriminals are targeting cryptocurrency users, exchanges, and third-party payment platforms in the virtual asset industry, resulting in large amounts of financial loss to victims,” the report read. 

The FBI released the alert via the Traffic Light Protocol, a system for distributing sensitive information to selected groups and individuals, on Thursday. The alert was classified as green, which means that alerted parties may share the information with other relevant groups, but the report cannot be distributed through public channels. 

Hackers may use techniques including SIM swapping, tech support fraud, and account stealing, the FBI said. SIM swapping is when a hacker uses a victim’s phone number to go around two-factor authentication security and access an account. It is a process that the FBI has warned about in the past. 

Officials recommended that individuals and groups with crypto holdings keep an eye out for phishing emails and monitor accounts closely. Crypto experts largely agree that hackers pose a significant threat to the industry. 

“Once a crypto account is hacked, attackers often use the unique structure, trading and economics of crypto markets to withdraw the funds and make other gains,” said Chen Arad, COO of risk monitoring firm Solidus Labs. “For example, often if hackers can’t immediately withdraw the funds, they may try to get them out of the account by trading valuable cryptos for less valuable altcoins in another account the hacker owns. Hacked accounts can also be used for market manipulation like wash trading or spoofing.”  

As retail and institutional interest in digital assets continues to grow, industry members expect federal organizations to become more involved in regulating the space. 

“The industry-wide warning from the FBI does not come as much of a surprise. As the cryptocurrency market grows and there is more money on the line, the threat from attackers online becomes more prevalent,” said Marcus Sotiriou, sales trader GlobalBlock. “I believe the FBI’s involvement in the industry will be a net positive, as it will hopefully result in a more secure digital economy and protect more cryptocurrency owners.”

The FBI alert comes shortly after Senator Elizabeth Warren released a letter to Securities and Exchange Commission Chairman Gary Gensler about the importance of cryptocurrency market regulation. 

“I write to request information regarding the Security and Exchange Commission’s (SEC’s) authority to properly regulate cryptocurrency exchanges and to determine if Congress needs to act to ensure that the SEC has the proper authority to close existing gaps in regulation that leave investors and consumers vulnerable to dangers in this highly opaque and volatile market,” Warren wrote. 

Warren claimed that unregulated exchanges leave investors vulnerable to market manipulation and fraud, particularly with decentralized platforms, citing recent comments made by Commodity Futures Trading Commission (CFTC) Commissioner Dan M. Berkovitz. 

“Berkovitz stated: ‘In a pure ‘peer-to-peer’ DeFi system… [t]here is no intermediary to monitor markets for fraud and manipulation, prevent money laundering, safeguard deposited funds, ensure counterparty performance, or make customers whole when processes fail,’” Warren wrote. 

As investors and industry leaders continue to wait for SEC guidance on crypto, Congress recently heard from crypto industry experts during the “America on FIRE” hearing last month. It was made clear that lawmakers have vastly different thoughts when it comes to determining how to address cryptocurrency regulation.