The United States Federal Trade Commission has labeled social media and crypto as “a combustible combination for fraud”, with nearly half of all crypto-related scams originating from social media platforms in 2021.
The report, released on Friday, found that $1 billion in cryptocurrencies were lost by scammers throughout the year, up more than five times compared to 2020 and nearly sixty times compared to 2018.
New analysis reports consumers lost more than $1 billion #cryptocurrency Fraud since 2021. Most consumer-reported losses were fake cryptocurrency investment scams: https://t.co/MYGTcaw1aS #DataSpotlight /one
– FTC (@FTC) June 3, 2022
As of March 31, the amount of crypto lost was already approaching half of the 2021 figure, indicating that the momentum is not slowing down.
The FTC found that the most used platforms for crypto scams were Instagram (32%), Facebook (26%), WhatsApp (9%) and Telegram (7%).
Interestingly, Twitter, the social media platform widely adopted by the crypto community, was not mentioned despite being filled with spam and scam bots distributing fake crypto giveaways.
According to scam reports to the FTC’s Consumer Sentinel Network, the most common type of crypto scam was Investment Related Fraud, accounting for $575 million of the $1 billion total.
“These scams often promise potential investors that they can get huge returns by investing in cryptocurrency schemes, but people report losing all the money they ‘invested’ on.”
According to the FTC, common investment scams involve situations where a so-called “investment manager” contacts a consumer and promises to raise his money – but only if the consumer buys cryptocurrency and transfers it to their online account.
Other methods include impersonating a celebrity who can replicate any cryptocurrency a consumer sends them or promises free cash or cryptocurrency.
The FTC also lists investments in fake art, gems and rare coins, fake investment seminars and advice, and various other investment scams as part of this group.
The next biggest loss regarding crypto scams came from Romance Scams, where a love affair tried to persuade someone to invest in crypto scams.
Commercial and Government Impersonation Scams came in third with a total of $133 million, as scammers targeted consumers by claiming their money was at risk from fraud or a government investigation.
“These scams can start with text about a supposedly unauthorized Amazon purchase, or with an alarming online pop-up that looks like a security warning from Microsoft. From there, people were told that the scam was extensive and their money was at risk.”
The scammers will then pretend to be the representative of the bank to secure the person’s crypto.
In other cases, scammers have been reported to impersonate border patrol agents, telling people that their nominal accounts have been frozen as part of a drug trafficking investigation. These scammers are telling people that the only way to protect their money is to invest it in crypto. They are directed to withdraw cash and feed it to a crypto ATM, and instead are tricked into sending it to the scammer’s wallet address.
The report found that people aged 20-49 are most likely to lose their cryptocurrency to a scammer, with people in their 30s most accounting for 35% of the total reported fraud losses.
Related: Life after crime: What happens to crypto seized in criminal investigations?
The amount of crypto lost increases by age group, with the median individual reporting that cryptocurrency losses for 70-year-olds reached $11,708 compared to just $1,000 for 18- and 19-year-olds.
An article on the FTC’s Consumer Advice website details several ways to avoid cryptocurrency scams:
- Only scammers demand payment in cryptocurrency. No legitimate business will require you to send crypto in advance so as not to buy anything and protect your money. This is always a scam.
- Only scammers guarantee profits or big returns. Do not trust people who promise to make quick and easy money in the crypto markets.
- Never mix online dating and investment advice. If you meet someone on a dating site or app and they want to show you how to invest in crypto or ask you to send them crypto, it’s a scam.