Cryptocurrency Fraud in Paraguay
Diosnel Alarcon, the head of the cybercrime division of Paraguay’s National Police, has unveiled alarming statistics regarding cryptocurrency fraud. He reported that illicit activities, including Ponzi schemes, have routed more than $4 billion through the country in 2023 and 2024.
“These scams have found fertile ground in emerging markets, where potential investors are lured in by enticing promises of rapid and significant financial returns.”
Alarcon pointed out that one of the primary facilitators of such scams is a network of intermediaries who mislead investors lacking fundamental crypto knowledge. In Paraguay specifically, there has been a notable uptick in scams often masquerading as legitimate platforms.
Mechanisms of Fraud
These operations are heavily reliant on social media and cryptocurrency exchange platforms, creating a seemingly legitimate investment environment. Victims are initially attracted by minor returns deposited into their accounts, leading to a false sense of security, as Alarcon illustrated:
“Individuals might remain oblivious to the scam for months before realizing the deception.”
Alarcon clarified that the astronomical $4 billion figure includes cryptocurrencies funneled through Paraguay that originate from fraudulent operations elsewhere. While he did not disclose specific methodologies used to arrive at this estimate, he acknowledged support from specialized firms in the investigation.
Challenges in Recovery and Regulation
Despite the traceability of cryptocurrency transactions, Alarcon pointed out the challenges in reclaiming lost funds and identifying responsible parties due to bureaucratic hurdles posed by international law and foreign corporate entities. He emphasized the importance of timely alerts about fraudulent schemes, asserting that swift action can increase the chances of halting these operations and recovering stolen funds before they can be withdrawn.
“Swift action can increase the chances of halting these operations and recovering stolen funds before they can be withdrawn through crypto exchanges or converted to fiat currency.”
Legislative Actions
In a related development, the Paraguayan Senate has enacted legislation imposing severe penalties, including potential prison sentences of up to ten years, for cryptocurrency miners involved in theft of electricity. This legislative action indicates a broader effort to regulate and combat cybercrime in the region.
