The euphoria around cryptocurrencies in 2021 has not only made millionaires and billionaires.
It was also a ruin for thousands of retail investors.
And things are not getting better since the beginning of 2022. Crypto scams, which multiplied last year, continue.
Since the start of 2021, more than 46,000 people have reported losing over $1 billion in crypto to scams, according to a new report from the Federal Trade Commission (FTC). That’s about one out of every four dollars reported lost, more than any other payment method.
The median individual reported loss is $2,600.
The top cryptocurrencies people said they used to pay scammers were Bitcoin (70%), the king of crypto, stablecoin Tether (10%), and Ether (9%), the second-largest crypto by market value.
The agency claims that crypto has become "an alarmingly common method for scammers to get peoples’ money."
"Crypto has several features that are attractive to scammers, which may help to explain why the reported losses in 2021 were nearly sixty times what they were in 2018," the FTC said.
The Median Crypto Loss to Romance Scammers Is $10,000
Firstly, there is no bank or other centralized authority to flag suspicious transactions and attempt to stop fraud before it happens.
Secondly, when the crypto transfer is made it can’t be reversed.
Thirdly, people are still unfamiliar with how crypto works.
The report also singles out ads and social media as the perfect pair that makes life easier for scammers.
"Nearly half the people who reported losing crypto to a scam since 2021 said it started with an ad, post, or message on a social media platform."
"During this period, nearly four out of every ten dollars reported lost to a fraud originating on social media was lost in crypto, far more than any other payment method."
In order, the scammers were luckiest on Instagram (32%), followed by Facebook (26%), WhatsApp (9%), and Telegram (7%).
The most common type of crypto fraud was investment scams, followed by romance -- with $185 million in reported cryptocurrency losses since 2021, which is nearly one in every three dollars reported lost to a romance scam during this period scams -- business imposters, and then government imposters.
Since 2021, $575 million of all crypto fraud losses reported to the FTC were about bogus investment opportunities.
"The stories people share about these scams describe a perfect storm: false promises of easy money paired with people’s limited crypto understanding and experience. Investment scammers claim they can quickly and easily get huge returns for investors. But those crypto 'investments' go straight to a scammer’s wallet," the report said.
As of romance scams, scammers reportedly brag about their supposed wealth and sophistication: "Before long, they casually offer tips on getting started with crypto investing and help with making investments."
The median individual reported crypto loss to romance scammers is $10,000, according to the FTC.
The regulator says here are the things to know to avoid crypto cons:
- Only scammers will guarantee profits or big returns. No cryptocurrency investment is ever guaranteed to make money, let alone big money.
- Nobody legit will require you to buy cryptocurrency. Not to sort out a problem, not to protect your money. That’s a scam.
- Never mix online dating and investment advice. If a new love interest wants to show you how to invest in crypto, or asks you to send them crypto, that’s a scam.