American consumers lost over $1 billion to cryptocurrency-related fraud over the course of the past year, according to a recent report from the Federal Trade Commission.
According to the latest FTC Consumer Protection Data Spotlight, between January 2021 and March 2022, consumers reported losing over $1 billion to fraud involving cryptocurrencies. With around one in four dollars in these scams being paid in crypto, the report suggests it has become the payment of choice for many criminal opportunists.
False narratives
A majority of the cryptocurrency losses consumers reported, some $575 million, were due to phony investment opportunities. These scams falsely offered the potential for massive returns from investing in cryptocurrency schemes, while those who “invested” instead merely lost all their funds.
In addition to the fraudulent investment schemes, there were several other consistent stories that consumers had fallen prey to. The second biggest were romance scams, in which a possible love interest would trick someone into investing in what turned out to be a cryptocurrency scam. Reports have also demonstrated that scammers will also target consumers by impersonating a business or government and claiming that their money is at risk of fraud or investigation unless it is converted into cryptocurrency.
Many of these scams were initiated on social media, with nearly half of those reporting a crypto-related scam since 2021 saying it began with an ad, post, or message on a social media platform. The FTC’s report underlined several red flags for consumers to be wary of, including claims of guaranteed profits or outsized returns on crypt investments, potential love interests asking for crypto payments, or any entity requiring payment in cryptocurrency.
Last year, the UK’s National Reporting Center for Fraud and Cybercrime received 7,118 reports of cryptocurrency-related fraud. According to the City of London Police, by the end of September the cryptocurrency fraud had defrauded victims of £146 million ($200 million), about 30% more than in 2020.
