Wednesday, June 8, 2022
Cryptocurrency scams accounted for about one in four dollars reported lost to fraud since January 2021, more than any other form of payment, the FTC said. The median reported loss was $2,600.
And things could get worse. Of the losses covered in the FTC's report, $680 million occurred in 2021. During the first three months of 2022, an additional $329 million in fraud losses were reported, suggesting losses this year could top $1.3 billion. A majority of reported payments to scammers, 70 percent, were in Bitcoin. About 10 percent were tied to Tether and 9 percent Ether, the primary token used on the blockchain Ethereum network.
The FTC report comes amid extreme volatility in the crypto market. The price of a singleBitcoin has tumbled from a high of $69,000 in November 2021 to just under $30,000 today. Ethereum, the second most popular cryptocurrency behind Bitcoin, has fallen nearly 60 percent, from $4,426 in November 2021 to just under $1,800.
Fraudsters rely on the fact that there are no banks or other centralized authorities to flag suspicious cryptocurrency transactions. Plus, crypto transfers can't be reversed, and most people are unfamiliar with how crypto works, making it easier for scammers to ply their trade, the FTC said.
Social media has been a boon for scammers. In fact, four out of 10 dollars reported lost to crypto scams began with social media posts. The top platforms identified by victims were Instagram (reported in 32 percent of cases), Facebook (26 percent), What's App (9 percent) and Telegram (7 percent).
Of reported crypto fraud losses that began on social media, most were investment scams. Since 2021, $575 million of all crypto fraud losses reported to the FTC involved bogus investment opportunities, more than any other fraud type, the FTC said. "The stories people share about these scams describe a perfect storm: false promises of easy money paired with people's limited crypto understanding and experience," the FTC wrote. Romance scams are popular, too, accounting for $185 million in reported cryptocurrency losses since January 2021. Many of these scams also have an investment twist. Keyboard Casanovas reportedly dazzle people with their supposed wealth and sophistication. Before long, they casually offer tips on getting started with crypto investing and help placing investments. The median crypto loss to romance scammers was $10,000, the FTC said.
Cryptocurrency losses to business and government impersonation scams totaled $133 million from January 2021 through March 2022. These scams often start with a text message about a supposedly unauthorized purchase, or with an alarming pop-up made to look like a security alert from Microsoft. In another twist, scammers impersonate border patrol agents delivering the news that the victim's bank accounts will soon be frozen as part of a drug trafficking investigation.
Victims are told the only way to protect their money is to put it into cryptocurrency. They are instructed to take deposit cash into a crypto ATM, using a QR code provided by the scammer to direct the deposit to what turns out to be the scammers crypto wallet.
Consumers between the ages of 20 and 49 were more than three times as likely as older consumers to have reported being scammed out of cryptocurrency. Older consumers, however, tended to lose more. Median losses for people in their 70s were just over $11,700.
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