On Friday, the Federal Trade Commission (FTC) released a report that outlined that more than 46,000 people had become victims of crypto scams since 2021 and had lost a whopping $1 billion. The report disclosed that as opposed to losses in 2018, the losses last year had increased by almost 60 times and average individual losses amounted to $2,600. It was further noted by the FTC that the cryptocurrencies that were mostly used by scam victims to pay these fraudsters were bitcoin, tether and ether, each being used in 70%, 10% and 9% of the cases.
An important feature of cryptocurrencies, such as bitcoin, is that their payments are final and irreversible. There can be no chargebacks where these digital currencies are concerned, a kind of tool that was introduced for protecting consumers because they could get a transaction reversed in case of fraud of any kind. But, this feature does not come with cryptocurrencies. Almost half of the people who became victims of crypto scams in 2021 disclosed that the whole deal had started with a message they received on some social media platform or the other. 32% of them came on Instagram, 26% on Facebook, 9% on WhatsApp and Telegram played a role in 7% of the cases.
The most common type of crypto scam was a fake investment opportunity presented to the victims. Of the total crypto fraud losses that were reported to the FTC in 2021, about $575 million were attributed to investment opportunities. According to victims, they could track the growth of their crypto investments via apps and websites, but they were unable to make a withdrawal because they turned out to be fake. The FTC issued a warning in its report that the crypto industry does not have a centralized authority or a bank that can flag any suspicious transactions that may occur.
The FTC said that while such considerations were certainly not limited to the crypto space alone, but they do benefit scammers. The second-most common type of crypto scam that occurred were romance scams and then came government and business impersonation scams. According to the FTC, the latter usually begin with fake messages from tech firms like Microsoft or Amazon. Statistics also showed that most crypto scam victims were younger consumers. The FTC stated that there was a three times greater chance of people between the ages of 29 and 40 to lose to a crypto scammer, as opposed to older age groups.
The FTC noted that people should understand that there can never be guaranteed returns where crypto investments are concerned. Likewise, people should not enter into any agreements that require them to purchase cryptocurrencies. They should also be wary of romantic come-ons that come with a crypto solicitation. This news comes after a brutal few weeks for the crypto space. The failure of TerraUSD shook the entire market and plunged it into chaos, as more than half a trillion was erased and investor confidence was in shambles.