It is no secret that cryptocurrencies have taken the world by storm. With a good section of the population invested in this world, crypto is on its way to becoming a mainstream payment method. However, along with global acceptance comes an alarming frequency of scams. According to a report by the Federal Trade Commission, over 46,000 people in the U.S have reported losing more than $1 billion in crypto to scams in 2021 – More than any other payment method.
It claimed that the top cryptocurrencies people said they used to pay the scammers were Bitcoin, Tether, and Ether. Bitcoin ranked the highest at 70%, Tether second at 10%, and Ether third at 9%.
Several features of cryptocurrencies attract scammers which helps us understand why the losses in 2021 were recorded to be nearly sixty times what was recorded in 2018. Also, since its decentralized, there is no bank or centralized authority screening suspicious transactions and flagging frauds. In fact, the report also found that since most people are unfamiliar with how crypto works, they become easy prey to such scams.
According to the same, social media and crypto are a deadly combination for fraud. A majority of the people who lost crypto to scams in 2021 said that they responded to an ad, post, or message on a social media platform. Out of the various social media platforms, Instagram was voted as the one with the highest frauds at 32%, Facebook came second at 26%, WhatsApp third at 9%, and Telegram came fourth at 7%.
50 shades of scammers
Since 2021, $575 million of all crypto-frauds reported to the FTC have been bogus investment opportunities. The stories that were shared about the scams they fell for had a similar dynamic – The false promise of fast money with people’s limited crypto-knowledge and experience. Most investment scammers promise huge returns in a short period of time. People have also reported that investment websites and apps let them track the growth of crypto, but it’s all fake.
Sometimes a small “test” withdrawal is also done to assure them it’s genuine so that they invest higher amounts.
The second type of scam that people often fall for is romance scams. According to the report, a total of $185 million has been reported in cryptocurrency losses since 2021. In these types of scams, fraudsters usually dazzle people with their wealth and sophistication before offering to help them get started with crypto-investing. The median individual reported these crypto-losses to be worth $10,000.
Next in line are business and government impersonation scams which have collected a whopping $133 million in crypto-losses since 2021. The scam usually starts with a text about an unauthorized Amazon purchase, an online pop-up that looks like a security alert from Windows. People are then usually told that the fraud is extensive and their money is at risk.
Sometimes “the bank” even calls the customers to warn them against the same.
People aged between 20-49 are most likely than any other age group to report losing cryptocurrency to scams. People in their 30s have been hit the hardest with 35% of all reported frauds being targeted in this age bracket in 2021.
With a lack of regulatory medium, it is going to be quite difficult to keep tabs on cryptocurrency scams. However, vigilance is key. Invest wisely.