Rising Tide of Cryptocurrency Scams Leaves 80% of Investors Defrauded
In a concerning revelation, the Better Business Bureau (BBB) has identified cryptocurrency and investment fraud as the most perilous for consumers in the United States. The annual report, based on 67,000 scam reports from 2023, highlights the increasing frequency of crypto scammers defrauding victims out of substantial sums.
According to the report, cryptocurrency fraud has emerged as the riskiest scam, with fraudsters employing innovative tactics to deceive investors. The report further stated that approximately 80% of Americans targeted in crypto and investment scams in the previous year ended up losing money.
Moreover, the median amount lost was around $3,800, although many fell victim to significantly larger losses in crypto-related schemes.
Cryptocurrency, being an unregulated investment space, has long been flagged by regulators and consumer advocates as susceptible to fraud. Fraudsters leverage social media, video game platforms, or text messages to initiate contact with individuals, often boasting about financial success through crypto investments. The conversation swiftly shifts to an ask, pressuring the target to engage in purchasing, trading, or storing digital assets on fraudulent exchanges.
During the pandemic, the popularity of cryptocurrencies surged, drawing interest from investors in tokens like Bitcoin, Ethereum, and Solana. The industry's market cap currently stands at $2.65 trillion. However, the allure of crypto investments comes with substantial risks, as seen in the collapse of FTX, once a major crypto exchange, in 2022, resulting in an $8 billion shortfall and allegations of misappropriation of customer funds.
Reports of crypto investors losing billions due to scams are not uncommon. In a recent incident, a 70-year-old California woman sued Chase Bank after losing $720,000 to a fraudster in a crypto scam.
Furthermore, the BBB also identified employment scams as the second riskiest fraud in 2023. In these scams, fraudsters contact victims, posing as employers, and convince them of a successful job application. The victim is then manipulated into providing personal information, resulting in a median loss of $1,995.
Online purchase scams secured the third spot in the list, with victims typically falling prey to fake websites, where they make purchases that are never delivered. The median loss reported in these scams was $71.
"Most online shopping sites are perfectly secure most of the time. Don’t let the fear that thieves might copy your credit card number stop you from shopping online. When you do shop online, however, it’s smart to be proactive about protecting your financial information," stated Randy Pargman, a senior director for Binary Defense, a cybersecurity company, and a former FBI computer scientist.
As cryptocurrency scams rise, regulatory bodies face the challenge of tackling a space known for its lack of regulation. Consumer education becomes paramount in mitigating risks associated with crypto investments. Furthermore, understanding the modus operandi of scammers and exercising caution on online platforms can help prevent financial losses.