The US Federal Trade Commission (FTC) says that more than $1 billion has been lost to crypto scams since the beginning of 2021 impacting over 46,000 individuals.
According to the FTC, the median individual reported loss stood at $2,600. The top cryptos involved in the scams include Bitcoin (70%), Tether (10%), and Ether (9%).
In total the FTC claims that crypto fraud accounts for one in every four dollars lost to fraud.
As well, the amount of fraud has risen by a whopping 60X since 2018 as crypto trading and the number of tokens have increased.
To quote the FTC:
“Certain features of cryptocurrency may explain why it’s a pet payment method for crooks and cons. There’s no bank or other entity to flag suspicious transactions before they happen. Crypto transfers can’t be reversed. Once the money’s gone, you can kiss your crypto buh-bye. And most people are still unfamiliar with how crypto works. Those considerations aren’t unique to crypto, but they do offer insights into why it’s become a fraudster favorite.”
The report says that much of the fraud starts out on social media like Instagram and Facebook with over half ($575 million) deriving from investment ploys that promise a lot but only deliver a loss. “Romance scams” are popular too.
Individuals aged 20-49 are most likely to get hit with these traps but older folks tend to lose more money.
While transactions on blockchain are traceable, smaller amounts tend to fly under the radar with law enforcement focusing on the bigger crimes.
Christopher Leach, a partner at Mayer Brown who joined the firm from the FTC’s Division of Financial Practices, shared a comment on the FTC’s report:
“When you have fraud losses in the billions of dollars, the FTC will be watching the crypto space carefully. And given Chair Lina Khan’s desire not to focus on whack-a-mole frauds, the FTC may look to service providers—including companies that provide payments or telecommunications services—the FTC believes may have provided substantial assistance to the scam.“
Rampant fraud, collapsing stablecoins, and a Securities and Exchange Commission that sees just about all crypto as securities mean a rocky path for the digital asset sector. Clear regulation for the industry is needed but that will not stop crypto fraud as the scams tend to remain the same – just the technology changes.
