DEA mistakenly sent $55,000 to crypto scammer in airdrop blunder: Forbes

The Drug Enforcement Administration, responsible for bringing down the dark web marketplace Silk Road, inadvertently transferred over $55,000 in cryptocurrency to a scammer in a recent airdrop blunder. 

The DEA seized more than $500,000 worth of the USDT stablecoin in May, connected to two Binance accounts, suspecting its use in illegal narcotics transactions, according to an FBI search warrant reviewed by Forbes.

The funds were stored in a DEA-controlled Trezor hardware wallet at a secure facility. However, a scammer observing the DEA's blockchain activities mimicked a test transaction the DEA had made to the U.S. Marshals Service. By creating a cryptocurrency address that closely resembled the Marshals' account — matching the first five and last four characters — the scammer tricked the DEA into transferring a significant sum to the wrong address, Forbes reported.

As cryptocurrency addresses are typically very long, many users only check the first and last characters when making transactions.

The scammer used a method known as “airdropping," sending a small amount of USDT to the DEA so it matched the test transaction amount. The fraudster hoped the DEA would simply copy the fraudulent address, mistaking it for the Marshal’s address. Unfortunately for the agency, the ploy worked, with the DEA sending over $55,000 to the scammer in one transaction.

While airdropping can be a legitimate cryptocurrency feature, often used in project token launches, it can also be used to deceive crypto owners.

Plea to freeze USDT too late

Upon realizing the mistake (after the Marshals alerted the agency), the DEA tried to contact USDT-issuer Tether to freeze the funds, but it was too late, and the money had already gone.

As USDT is a centralized stablecoin, Tether can freeze transactions on blockchains where it’s deployed.

In collaboration with the Federal Bureau of Investigation, the DEA discovered the stolen funds were converted into ether and bitcoin and transferred to a new wallet. While the FBI’s warrant didn’t confirm the identity of the fraudster, two Binance accounts were used to pay the scammer's transaction fees linked to anonymous Gmail accounts. The agents are hoping Google can now assist the investigation, with the scammer's wallet still containing $40,000 and having received $425,000 since June, Forbes said.

Last month, around 9,800 in Silk Road bitcoin started moving — the largest movement of funds linked to the now-shuttered darknet marketplace in months.

The DEA did not respond to a request for comment from The Block.