US and Canada crack down on $4,3 million Ethereum phishing scam

• Approval phishing has already caused billions in losses
• Scam targets users with high volumes of Ethereum
• International operation aims to recover cryptocurrencies

A joint international operation between authorities in the United States and Canada has resulted in the dismantling of an approval phishing scheme that caused an estimated $4,3 million in losses to Ethereum users. The operation was coordinated by the U.S. Secret Service in partnership with Canadian law enforcement and regulatory agencies.

According to information published by website Decrypt, the scam involved manipulating transactions signed by users who, often unwittingly, granted criminals permission to access and move their tokens. This practice, increasingly common in the cryptocurrency space, is often associated with relationship fraud known as “pig butchering” — in which victims are tricked into handing over control of their wallets after falsely building trust.

Dubbed Operation Avalanche, the operation has no connection to the blockchain of the same name. It identified hundreds of affected Ethereum wallets and notified holders of the risks and losses. The main goal was to contain the spread of the scam and recover misappropriated assets.

The operation was supported by several entities, including the British Columbia Securities Commission, the Ontario Provincial Police, the Alberta and Ontario regulatory commissions, the Financial Markets Authority, the Vancouver and Delta police departments, and the Royal Canadian Mounted Police. Also collaborating were an as-yet-unidentified cryptocurrency exchange and a blockchain forensics firm.

Special Agent Matt McCool of the U.S. Secret Service said the agency will continue to work with Canadian partners to identify and seize the stolen digital assets.

A Chainalysis survey cited in Decrypt indicates that approval phishing scams have already caused losses exceeding US$2,7 billion between May 2021 and July 2024. Although DAOs are also targeted, the focus generally falls on individual investors with high-value portfolios, as in the case of a collector who lost NFTs from the Bored Ape collection in an “ice phishing” attack.