More than 46,000 American consumers have officially reported a total loss of $1 billion in cryptocurrency to fraud from January 2021 through March 2022, according to a new June 3 report from the Federal Trade Commission.
The FTC reported that the data is based on fraud reports made directly to the agency, which means that most crypto scams on Americans are likely underreported, given that many victims do not report their experiences to authorities.
The government agency reported that the median loss from an individual scam was $2,600.
Fraud report data suggests cryptocurrency is quickly becoming the payment of choice for many online scammers, with about one out of every four dollar transactions paid in crypto reported lost to fraud.
“Crypto has several features that are attractive to scammers, which may help explain why the reported losses in 2021 were nearly sixty times what they were in 2018,” said Emma Fletcher, an FTC senior researcher on the agency’s Consumer Protection Data Spotlight blog.
“There’s no bank or other centralized authority to flag suspicious transactions and attempt to stop fraud before it happens.”
“Crypto transfers can’t be reversed—once the money’s gone, there’s no getting it back. And most people are still unfamiliar with how crypto works. These considerations are not unique to crypto transactions, but they all play into the hands of scammers,” Fletcher concluded.
The Consumer Protection Data Spotlight found that most of the reported cryptocurrency losses involved bogus cryptocurrency investment schemes, totaling $575 million in reported losses since January 2021.
These scams tend to propose its victims invest their cryptocurrency into a scheme that would earn huge returns, with the entrapped victims usually reporting a total loss in the money that they invest.
The FTC reported that social media has become the primary breeding ground for crypto-related fraud.
Nearly half of those who reported losing money to cryptocurrency scams admit that it was through an online ad, post, or message on a social media platform.
The report said that out of those reporting being a victim of fraud on social media, 32 percent said it was on Instagram, 26 percent on Facebook, 9 percent on WhatsApp, and 7 percent on Telegram.
People ages 20 to 49 were more than three times as likely than older age groups to have reported losing money to a cryptocurrency scam.
However, older age groups have reported losing more money when reporting a cryptocurrency-related scam.
“People report that investment websites and apps let them track the growth of their crypto, but it’s all fake,” said Fletcher.
The scams often offer promises of large returns on an initial investment, which is then siphoned off into the scammer’s crypto wallet.
“Some people report making a small test withdrawal—just enough to convince them it’s safe to go all in. When they really try to cash out, they’re told to send more crypto for (fake) fees, and they don’t get any of their money back,” she explained
Meanwhile, the value of cryptocurrencies such as Bitcoin, Ethereum, and Ether has taken a nose dive in recent months.
In November, the total market capitalization of cryptocurrencies had reached its historic peak of nearly $3 trillion but has since fallen to roughly $1.2 trillion at the present.