The Federal Trade Commission (FTC) has issued one of its periodic Consumer Protection Data Spotlights, advisories issued at no particular interval that are meant to warn the public of hot trends and growing threats in digital crime. The June 2022 edition is devoted to crypto scams, which have taken $1 billion from consumers since January 2021.
The advisory tracks statistics up to May 2022, but the losses from 2021 alone represent a 60x increase from those recorded in 2018, and over 5x the 2020 numbers. The $1 billion in losses over roughly the last year-and-a-half were divided among about 46,000 victims, with a median loss of $2600 for each individual caught up in crypto scams. 2022 is on pace to break the annual record, with $329 million in losses in the first quarter alone.
Crypto scams fed by lax social media policing, impersonation of major international corporations
The FTC’s research finds that more than half of all crypto scams are centered on a fake investment opportunity, and a little less than half started with contact on a social media platform. Additionally, about 40% of the total funds lost were due to a scam that originated on a social media site.
Crypto scams appear to be flourishing on the Meta family of sites: Instagram (32%), Facebook (26%) and WhatsApp (9%) were by far the preferred hunting grounds for scammers, collectively making up a little over 65% of all the incidents originating on social media. Scammers are varied in their methods on social media, sometimes directly messaging users after combing profiles for likely targets, sometimes posting fake ads, and sometimes making use of misleading posts.
Another interesting point of note is that, despite much recent talk of so-called “privacy coins” (such as Monero) driving cyber crime, crypto scams seem to prefer the tried-and-true staples that are easier to track: Bitcoin (70%), Tether (10%) and Ether (9%) were the leading payment methods.
Fake investments lead all crypto scams with $575 million in stolen money since the start of 2021. Investment scams generally target people with little experience with crypto, but who have heard tales of small investments ballooning in a short period of time. These scams often bait the hook with a small initial cashout, which encourages people to put substantial money into the scam. If they try to cash out again, the scammers usually tell them to invest more in “fees” and end up absconding with the entire amount at some point.
The second most common of the crypto scams involves romance, with the scammers posing as wealthy investors who develop a personal interest in the target. After some period of normal back-and-forth “getting to know you” conversation, the scammer casually mentions that they made their money in crypto and offers to help the target invest. Eventually, they provide the target with instructions that simply end with a large transfer of money to the scammer, who then disappears.
Another scam type that took over $100 million from victims over this period is the impersonation of legitimate businesses or government agencies. Scammers mock up messages, emails, paid advertisements and website pop-ups to look like they are being issued by an assortment of legitimate organizations. They seem to prefer the biggest names in tech and retail, such as Amazon and Microsoft. There are a wide variety of approaches in this category, with some of the more common being fake computer security alerts and telling people that they are the subject of federal investigations. Regardless of the approach, the end result is usually to tell the victim to go to a crypto ATM with a QR code and hold it up to the camera; this transfers their funds to the scammer.
Unlike most financial crime, crypto scams frequently hit young adults
Scammers generally target older adults, preferring to work by mail and phone. Crypto scams represent a break with this pattern, going where the money is: people between the ages of 20 to 49.
Adults under 50 are three times as likely to be targeted by crypto scams than their elders, and those in their 30s took the largest financial hit as a collective group. However, when older adults are targeted for scams, they tend to individually lose the most money: those over 70 had a median loss of over $11,000, as compared to $2,600 for all victims.
The FTC report points out that most crypto scams are fairly easy to sniff out with a little knowledge. Most involve the scammer asking the victim to pay them directly for crypto, instead of going to an exchange. Scammers are also the only ones that “guarantee” huge returns. And if a potential date starts bringing up crypto investing tips during the initial online conversation, it’s a sign to run the other way.
