Canada has become ‘weak link’ in fight against crypto scams

“I was hoping that I can just get some money while I’m at home recuperating,” the 41-year-old said.

She later realized the video was an AI-generated fake, but not before she clicked on the next crypto ad that popped up on her feed, believing she had signed up for an online job with a purported investment firm. She was soon pulled into a whirlwind of fraudsters who gained her trust by giving her pretend profits, and then convinced her to send them more than $13,000 worth of virtual currency — money she only had by taking out a line of credit.

Mariscal had been swept up in a rising wave of cryptocurrency investment scams that have stolen untold sums from Canadians in recent years while evading law enforcement and regulators, who experts say are stuck playing catch up with the ever-evolving crypto world.

Canada was once recognized as a global leader in digital asset regulations. In 2014, it became the first country in the world to pass laws addressing cryptocurrency, which brought businesses dealing in crypto under the purview of the federal anti-money laundering watchdog Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

Cryptocurrency exchanges — the crypto equivalent of banks, allowing customers to buy, sell and trade digital currency — must register with FINTRAC as money services businesses and comply with anti-money laundering laws. Many are also required to register with provincial or territorial securities commissions, which enforce rules to protect investors’ assets.

But in recent years, scammers have exploited soft spots in the regulations, experts say, directing victims to use registered companies in Canada to buy virtual currency before whisking their funds to foreign crypto exchanges that are not allowed to operate in the country.

Victims are also often faced with a justice system — from police to courts — that is still learning the ropes of tracing lost crypto and struggling to keep up with mounting scam cases.

A spokesperson for the federal Department of Finance did not answer detailed questions about Canada’s approach to regulating cryptocurrency, but said in an email that the federal government “takes financial crimes seriously and is committed to maintaining a strong anti-money laundering and anti-terrorist financing regime.”

Experts say Canada needs to catch up on crypto regulation, lest it leave more people here vulnerable to being victims of scams and fraud.

“The place to stop it is in Canada, on Canadian soil, getting a proper enforcement mechanism in place and having more supervision,” said Garry Clement, a retired senior RCMP investigator who used to manage the force’s financial crime program.

“We are recognized around the world as a very weak link.”

Marienelle Mariscal is one of 18 crypto scam victims in Canada who collectively lost more than $3 million between 2021 and 2025, identified as part of The Coin Laundry, a cross-border investigation led by the International Consortium of Investigative Journalists (ICIJ) in collaboration with the Star and 36 other media outlets in 35 countries.

Those numbers are the tip of the iceberg. The Canadian Anti-Fraud Centre says more than 5,000 people reported losing more than $170 million to cryptocurrency-related frauds in 2024. For the first nine months of 2025, more than 3,500 people were defrauded of close to $140 million in cryptocurrencies.

The centre cautions that its numbers are likely vast underestimations, with only five to 10 per cent of fraud victims reporting.

Over the last few years, Canada has taken steps to increase its scrutiny of the crypto industry, including criminalizing the operation of unregistered money services businesses and requiring criminal background checks for FINTRAC registration.

However, regulated firms often end up being used as stepping-stones by scammers seeking to move stolen money out of reach to overseas crypto exchanges that are not overseen by Canadian regulators.

Acting on the instructions of purported “financial managers” who alternated between coaching her and yelling at her in spring 2025, Mariscal set up an account with VirgoCX, a registered crypto trading platform based in Toronto.

The “financial managers” instructed her to buy about $13,000 (Canadian) worth of USD Coin, or USDC, a type of cryptocurrency pegged to the U.S. dollar. Then, the scammers asked her to transfer the coins to a different virtual wallet address through two transactions, nine days apart. She believed she was making an initial deposit to open an account on an investment trading platform.

Most cryptocurrency transactions, Mariscal’s included, are recorded on public ledgers called blockchains. The Star and its global partners traced the movement of Mariscal’s stolen funds through blockchain analysis, and found that after Mariscal transferred her funds out of her VirgoCX account, the crypto first flowed to an anonymous virtual wallet, the crypto equivalent of a bank account. From there, the fraudsters moved the funds to a second wallet, where Mariscal’s USDC mixed in with coins from other transactions.

Those combined funds jumped one more time to a wallet address on a crypto platform called HTX, the analysis shows.

HTX, formerly known as Huobi, is a global crypto exchange founded in 2013 that does not have legal authorization to operate in Canada. It has been named in court filings by crypto scam victims in several countries over alleged connections with illicit funds and laundering proceeds. It also appears to be operating in a jurisdictional vacuum: the platform has no publicly known physical headquarters. HTX did not respond to repeated requests for comment for the Coin Laundry investigation.

Erin West, a former prosecutor who specialized in cryptocurrency cases before starting Operation Shamrock, a U.S.-based non-profit focused on disrupting online scams, said Mariscal’s case follows a common pattern.

“The entry point is always a known regulated in-country exchange. The money then flows out to places where it is difficult to recover the funds,” West said.

“That’s why it works well for bad guys.”

Unlike traditional banks that have had decades to build robust systems for flagging suspicious transactions, cryptocurrency exchanges face unique challenges — such as anonymous crypto users and instantaneous transactions — that can make monitoring difficult.

When Mariscal turned to VirgoCX for help, the company told her to report it to law enforcement and declined to give her information about where her stolen funds went, according to emails reviewed by the Star.

Joseph Tosti, VirgoCX’s chief compliance officer, declined to comment on the specifics of Mariscal’s case, saying the company is required to protect customers’ personal information. He wouldn’t say whether the platform flagged any of Mariscal’s transactions internally or to FINTRAC.

“VirgoCX takes its regulatory obligations very seriously and submits suspicious transaction reports to FINTRAC whenever the threshold for suspicion is met,” Tosti said.

Tosti also said VirgoCX protects customers by scanning for associations with bad actors, freezing suspicious transactions and sending “pop-ups warning our customers of the dangers of sending cryptocurrency to third parties,” which customers must acknowledge before withdrawing funds.

West said crypto platforms should be doing more to protect their customers.

“There are opportunities to intervene,” she said, adding that exchanges have an obligation to do better.

The Ontario Securities Commission, with which VirgoCX is also registered as a crypto trading platform, declined to comment on Mariscal’s case. But the regulator acknowledged an increase in the reports of crypto scams over the last three years.

From January to November 2025, it received more than 1,000 reports, more than tripling the number recorded in 2023. The commission says this rise is partly due to increased investor awareness.

“The OSC has made efforts to disrupt these schemes in collaboration with domestic and international partners and continues to expand its proactive efforts to disrupt fraudulent ads and websites and also shares information with other regulators and law enforcement agencies to support their actions,” spokesperson Curtis Lindsay said.

Major crypto exchanges often have compliance departments tasked with ensuring companies follow legal and ethical standards. But they can hardly keep pace with scammers and criminals whose methods constantly evolve, according to more than a dozen former employees of major exchanges who spoke to ICIJ and the Star. In some cases, they said, fraudsters counsel victims to lie to compliance analysts who might question concerning transactions.

The former employees said a company’s commitment to compliance often hinges on its resources. Compliance work is expensive, it doesn’t generate revenue and the guardrails it requires can sometimes frustrate customers.

Globally, law enforcement struggles to stop cryptocurrency-based crime and recover stolen funds. ICIJ and its media partners interviewed 45 victims of sophisticated cryptocurrency scams on four continents. Most said their complaints to the police went nowhere.

Police in Canada in particular are spread thin and struggling to keep up with a flood of crypto-related crime despite their best efforts, Clement said.

Robin Percival, a spokesperson for the Royal Canadian Mounted Police (RCMP), told the Star that Canadian legislation is comparable to other jurisdictions, which face similar challenges.

“The RCMP is making progress in responding to this unique environment by implementing a number of initiatives to increase effectiveness in investigating cryptocurrency-enabled crime,” Percival said.

She noted the Mounties are developing national training courses, and acquiring the tools and technology to support investigations.

The Mounties also advise Canadians to report fraudulent activity to their local police.

Carrissa Weber, who lives outside Calgary, said she saw movement on her case six months after she reported a crypto scam to a local branch of the RCMP. But it wasn’t without pressure.

Earlier this year, the 58-year-old said she lost more than $35,000 in crypto — her life savings, and loans that the scammers had encouraged her to take out.

Weber’s stolen funds eventually landed in virtual wallets that sent most of their funds onward to accounts held at a U.S.-based exchange called OKX, according to an ICIJ analysis.

She reported the theft to Alberta RCMP, but said she heard nothing until the ICIJ began asking questions about it to OKX and police.

In late October, an OKX spokesperson told ICIJ that the firm froze the accounts that had received Weber’s funds earlier that month because they had “demonstrated other suspicious characteristics.” The spokesperson also said that the accounts in question had been “subject to enhanced monitoring by OKX” since November 2024.

“We feel deeply for the victims of these scams and will do everything in [our] power to see that any funds we still have access to, or information on, is returned via proper channels. Unfortunately, like many criminal activities, unravelling the complex networks of participants, techniques and jurisdictions can take months if not years to fully resolve,” OKX spokesman Elliott Suthers told the Star.

On Nov. 24, a week after ICIJ published a story detailing Weber’s experience, OKX global head of litigation and investigations reached out to her.

The same day, Weber said she also got a surprise visitor: an RCMP officer who showed up at her house and confirmed they were still working on the file.

“It just feels very forgotten,” Weber told the Star. “Nothing gets done until somebody shakes the tree.”

Alberta RCMP spokesperson Gina Slaney told the Star investigations like these are “very complex and difficult,” and it is typical for them to take some time.

“I have done a full review of the file, and it is being investigated properly.”

Even if Canadians are able to locate their stolen crypto, recovering it is its own challenge.

In 2023, Ottawa resident Taylan McRae-Yu was hot on the heels of a Belleville, Ont.-based group known as the Boneheads, who he alleges defrauded him and thousands of other customers of millions of dollars in a crypto-based digital token sale.

McRae-Yu traced some lost funds to crypto wallets he alleges belong to the Boneheads, and in June 2023, he obtained an order from an Ontario court to freeze more than $1 million of crypto within them.

In July 2024, a year after the order was issued, the majority of the assets were moved out of one wallet that was meant to be frozen and into another that isn’t covered by the court order.

Typically, a crypto exchange can freeze wallets on its platform in response to court orders, much like traditional banks can put holds on accounts. But most of the assets frozen in the Boneheads case resided in a type of crypto wallet that is not associated with any exchange, meaning there is no third party with power to restrict it. Only the users have control.

Lawyers representing the defendants didn’t respond to questions from the Star, but have previously denied that the wallet in question belongs to the Boneheads. Court records show the defendants intended to appeal the order, which covers a long list of other assets and wallet addresses.

Brendan Peters, a lawyer who has faced roadblocks in seeking production orders from foreign crypto exchanges, said Canada has fallen behind the United Kingdom and other countries that have made a concerted effort to manage crypto cases as they move from police to the courts.

“There just doesn’t seem to be much attention paid,” he said. “We don’t have the law enforcement infrastructure and the judicial infrastructure and the legislative infrastructure that other countries have.”

This year, the federal government promised to establish a new Financial Crimes Agency to investigate money laundering, organized criminal activity and online financial scams.

FINTRAC told the Star it is committed to enforcing rules for companies that deal in crypto. The agency fined two of them this fall for a total of nearly $200 million.

“For me it’s refreshing to see that we are building that capacity. It’s taken a long time. I hope it’s not closing the barn door after the cattle are out, but at least they’ve started,” Clement said.

— With files from the International Consortium of Investigative Journalists