Cryptocurrencies: More than $1 billion lost to fraud in the United States since 2021
As of Jan. 1, 2021, more than 46,000 people have fallen victim to crypto scams in the United States, according to a Federal Trade Commission (FTC) report. Fake investment opportunities are popular with scammers.
With the cryptocurrency craze, scams are proliferating in the industry and proving particularly lucrative for the cybercriminals who implement them. As of Jan. 1, 2021, more than 46,000 people in the United States have lost more than $1 billion to crypto fraud, according to a report by the Federal Trade Commission (FTC). The top cryptocurrencies used by victims to pay scammers are bitcoin (70%), tether (10%) and ether (9%).
The US agency says nearly half of the victims said the scams started with a social media ad, post, or message. Since early 2021, nearly $4 in every $10 reported lost to social media scams have been cryptocurrency losses, far more than any other form of payment, the report said. Meta’s applications, namely Instagram (32%), Facebook (26%) and WhatsApp (9%), as well as Telegram (7%) are among the social networks favored by scammers to steal money from victims.
On social networks, but not only, most scams are based on false investment opportunities. As of 2021, this accounts for $575 million of all crypto fraud losses reported to the FTC. Investment scams account for $185 million of the billion lost from love scams, while schemes to impersonate corporations and governments account for $133 million in losses. In particular, last year the American agency had revealed that imitators of Elon Musk had managed to fool certain netizens in order to collect millions of dollars.
Lack of knowledge of how cryptocurrencies work in favor of scammers
According to the FTC, several characteristics of cryptocurrencies explain their success with scammers. “There is no bank or other centralized authority that flags suspicious transactions and tries to stop fraud before it happens. Cryptocurrency transfers cannot be reversed. Once the money is gone, there is no way to get it back. And most people still don’t know how cryptocurrencies work. These considerations don’t just apply to crypto transactions, but they all play into the hands of scammers.”writes the organization in its report.
Last year, cryptocurrency crime hit an all-time high, with $14 billion taken from illegal wallet addresses last year, according to Chainalysis’ 2022 Crypto Crime Report. This represents a 79% increase from the $7.8 billion received in 2020. These illicit wallets were largely fueled by fraud, which grew by 82% to $7.8 billion in stolen cryptocurrencies worldwide in 2021. Of that, more than $2.8 billion was stolen using the method of “rug pull,” an English term that translates to French as “rug pulling.” In the cryptocurrency industry, this means a scam where the founders of a project give up and run away with the funds brought in by investors.