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USDC scam: How to get your money back?

The USD Coin (USDC) was considered a stable alternative to BUSD and USDT for a long time. After all, the issuer Circle was considered by many market observers to be much more solid. Regulatory issues also play a major role in this assessment, because Circle, unlike Tether and Binance, is fully licensed in the U.S. and is allowed to offer the stablecoin on the U.S. market.

Originally, Binance had also worked out a similar status with its partnership with Paxos, but this partnership ended this year. US authorities banned the BUSD stablecoin because doubts arose that BUSD was collateralized at all times. Allegedly, BUSD was not fully collateralized for a short time. USDC also experienced a bitter setback in March 2023, which was not due to the SEC's intervention but left investors traumatized.

In this article, we will briefly explain which crisis prepared the stage for the currently rampant USDC scams. We will also show you what to do if you are a victim of a scam and how to protect yourself from it.

The story behind the USDC scam: Circle and the SVB

Like other tech companies, Circle had deposited some of its funds with Silicon Valley Bank. Specifically, this was about $3.3 billion in cash reserves. This was only a fraction of the roughly $40 billion they managed. When it became clear that Silicon Valley Bank was likely to bankrupt, the chaos was perfect.

Shortly after the news broke, Circle had to publicly announce that it could no longer withdraw the $3.3 billion in time. This made it clear that the USD Coin was no longer fully backed by U.S. dollars, and immediately investors started dumping the stablecoin. Expecting a catastrophe, the market panicked and USDC briefly dropped to $0.85.

Several exchanges stopped USDC deposits, which did not help the situation. While investors could not then panic sell further, they still wanted to sell their positions.

The SVB depositor bailout gave Circle the money back , and USDC returned to its dollar price peg a short time later. But the attention and uncertainty in the market opened a window of opportunity for scammers. They tried to capitalize on the uncertainty among investors.

How does a USDC scam work?

As far as details are known, these are primarily targeted phishing campaigns. They aim to drain the wallet of investors who are concerned about USDC. Scammers create fake websites and promote them on social media. In particular, on Reddit, the scammers initially had great success and spread fake pages on various subreddits. However, scammers are also active on Twitter and attach themselves to various tweets in the comments section to attract potential victims.

For instance, the scammers pretend that Circle is holding a USDC airdrop to mitigate investors' losses. To receive the supposed gift, visitors are prompted on the page to connect their wallet and confirm a transaction. If one complies with this request, the malicious site completely empties the wallet.

Circle has publicly warned, people not to fall for the scammers. The company does not give gifts or hold airdrops.

How can you protect yourself from the USDC scam?

In principle, it helps to follow simple security recommendations. This includes, for example, using different wallets. One should be kept as cold storage, which is never connected to web applications. This is where you keep your cryptocurrencies safe. You should use a separate wallet that only provides the necessary funds when interacting with dApps or web applications. This separation between wallets minimizes losses in a worst-case scenario.

Otherwise, all the general tips on phishing apply; we go into more detail on this topic in the linked article. It is very important to note that companies like Circle do not give away Coins or Stablecoins. A stablecoin is backed by cash reserves or dollar-denominated assets. Unlike DeFi applications, the provider has no interest in such actions at all.

The same applies to all other stablecoins, such as USDT, which is issued by Tether and has an even higher market capitalization. It can be assumed that other stablecoins will also become interesting for scammers once they have achieved a corresponding success with the USDC scam.

I have fallen victim to a USDC scam, how do I get help?

If you have fallen victim to one of the scams described above, then you should contact Crypto-Tracing. We will act as private investigators for you and work in close cooperation with the lawyer Dr. Maisch, who has proven expertise in the field of cybercrime. Support during all stages of criminal proceedings is essential. Our work begins with the identification of the perpetrators, and the preparation of the criminal complaint and ends, in the best case, with the proceedings against the accused.

Crypto-Tracing follows the trail of the perpetrators and clarifies where they have transferred stolen cryptocurrencies. It is not uncommon for the perpetrators to attempt to convert the cryptos into dollars or euros via relevant exchanges. We support law enforcement agencies by documenting our investigative findings. In many cases, authorities lack expertise or personnel, resulting in valuable time being lost or cases not being adequately processed. Crypto-Tracing closes this gap and ensures that victims get a chance to recover their money.

A successful investigation and a criminal complaint are prerequisites for this. You can describe your case to us via our contact form. We will contact you promptly and discuss personally what is best to do in your case.

    Timo Züfle

    Timo is a lead investigator and cryptocurrency expert. He explains how to protect yourself from fraud and how to track down perpetrators.