Bitcoin and other crypto frauds are taking more money than ever, says the FTC

Bitcoin and other crypto frauds are taking more money than ever, says the FTC

The collapse of the cryptocurrency is not the only way a decentralized currency can lose a lot of real money to its owners. According to a new report by the Federal Trade Commission (FTC), cryptocurrency is increasingly being used as part of scams, either as part of the scam itself or just as a way for scammers to be paid.

The FTC says 46,000 people reported losing cryptocurrencies worth more than $ 1 billion in fraud between January 2021 and March 2022, noting that this number is just people reporting their losses to the FTC. It is likely that the actual number of people cheating and losing cryptocurrencies is much higher, as most victims do not report their losses to the FTC.

While that billion-dollar figure may not reflect the actual amount of money lost, it shows how much crypto fraud has increased: reported losses were nearly 60 times higher in 2021 than in 2018. And in the first quarter Only in 2022, losses were already roughly half of what they were all over in 2021. A quarter of the money lost in reported scams is now in crypto.

Crypto already has a not-so-great reputation as a playground for illegal shopping, hacker ransom, and money laundering. Its growing role in old-fashioned scams will not help enthusiasts argue that virtual currency should play a bigger role in legitimate financial markets and banks. While President Biden signed the executive order last March to get regulations on cryptocurrencies, it is not known what they will be like, when they will be introduced or whether they will do anything to prevent fraud.

Fraud experts say the trajectory is alarming and is likely to only get worse.

“When criminals catch a new way of stealing people’s money, others follow it,” said Kathy Stokes, director of fraud prevention at AARP, which has its own crypto fraud resourcessaid Recode. Combined with the ‘legitimizing’ forces of pro-cryptocurrency and the move by 401 (k) plan service providers to add this unregulated, highly speculative investment as an option for their plan participants, it can’t be said how much money will be lost – which is likely he won’t get it back. “

More than half of that billion dollars came from investment fraud: people who promise to be able to invest victims ’money in cryptocurrencies for big returns. This type of fraud is not new even if it is the type of currency used in it, but the once flourishing crypto market probably made it easier to sell to victims. It certainly helped, until recently, people regularly reported making huge amounts of money as cryptocurrency prices exploded. Combine that with the fact that most people don’t know much about cryptograms at all and you have the perfect recipe for scams.

The second biggest losses came from romantic scams, which appear to be linked to investment fraud. Usually, someone gains the trust of the victim through a relationship, and then forces her to give her money to an investment scam or to the “Casanova keyboard”, as the FTC vividly calls them. The fraudster then promises to invest – just to make the fraudster disappear with the money.

In third place were business and government fraud scams that require payment in cryptocurrencies. Usually someone will receive an SMS, email or call about the purchase they made or the money they owe to a government agency. Although the victim never made that purchase and does not owe that money, they were told that they had to pay in order for the problem to disappear. They are increasingly being told to make these payments in the crypto, thanks widespread availability crypto ATMs that make victims quick and easy to make those payments, and investigators find it difficult to track them down.

Younger people (aged 20 to 49) were three times more likely to be deceived in this way than other age groups, but the average amount of money lost on fraud increased with age. This is generally true for non-cryptocurrency scams as well: although the stereotype is that only older people fall for online scams, young people actually more likely to be victims. Their losses, however, are not so devastating, because there is usually less money, and it may be easier for them to recover financially.

Another reflection of the times and the media: Almost half of the people who reported being cheated said that it was created on social networks – mostly Instagram and Facebook. It is worth noting that the FTC is an American agency and platforms such as Telegram and WhatsApp (where crypto fraud also proliferate) are much more popular in other countries. That’s more than four times the number of crypto frauds started on social media in 2018. Overall, social media-based scams (as well as those involving all forms of currency, not just cryptocurrencies) have balloon in recent years.

This report is far from the only one that emphasizes how fraudsters take advantage of poorly regulated and difficult to track decentralized virtual currency. It could be a harder to sell to consumers and regulators that cryptocurrencies can be a legitimate and useful financial tool. While many crypto enthusiasts point to the benefits of a currency not controlled by banks and governments, this lack of control makes it easier for bad players to take advantage. And that should make consumers more cautious in investing money in cryptocurrencies, especially when even legitimate investments are losing money.

The FTC recommends that you stay away from investments that promise big returns, anything that requires payment in cryptocurrencies, and not to confuse online dating with investment tips. It also has a dedicated page for crypto fraud.

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