Rising Tide of Cryptocurrency Scams Leaves 80% of Investors Defrauded
In a troubling finding, the Better Business Bureau (BBB) has identified cryptocurrency and investment fraud as the most hazardous threat to consumers in the United States. The annual report, compiled from 67,000 scam reports from 2023, underscores the growing prevalence of cryptocurrency scammers deceiving victims and causing significant financial losses.
The report highlights cryptocurrency fraud as the most perilous scam, with fraudsters utilizing innovative methods to deceive investors. Approximately 80% of Americans targeted in cryptocurrency and investment scams in the preceding year incurred financial losses.
Furthermore, the report reveals that the median amount lost in these scams was approximately $3,800. However, many victims experienced substantially larger losses as a result of schemes related to cryptocurrency.
Cryptocurrency, characterized by its unregulated nature, has been a focal point for regulators and consumer advocates due to its susceptibility to fraud. Fraudsters exploit various platforms, including social media, video game platforms, or text messages, to initiate contact with individuals. They often flaunt purported financial success achieved through cryptocurrency investments to entice potential victims. Subsequently, the conversation swiftly transitions to a request, exerting pressure on the target to participate in activities such as purchasing, trading, or storing digital assets on fraudulent exchanges.
During the pandemic, cryptocurrencies experienced a surge in popularity, attracting investors to tokens like Bitcoin, Ethereum, and Solana. The industry’s market capitalization currently stands at $2.65 trillion. However, the appeal of crypto investments is accompanied by significant risks, as demonstrated by the collapse of FTX, a once-major crypto exchange, in 2022. This collapse resulted in an $8 billion shortfall and allegations of misappropriation of customer funds.
Instances of crypto investors losing substantial sums due to scams are not uncommon. In a recent incident, a 70-year-old California woman filed a lawsuit against Chase Bank after losing $720,000 to a fraudster in a cryptocurrency scam.
Additionally, the Better Business Bureau (BBB) identified employment scams as the second riskiest fraud in 2023. In these scams, fraudsters impersonate employers and contact victims, leading them to believe they have successfully applied for a job. The victim is then coerced into providing personal information, ultimately resulting in a median loss of $1,995.
Online purchase scams ranked third on the list, with victims commonly falling victim to fake websites where they make purchases that are never fulfilled. The median reported loss in these scams was $71.
Randy Pargman, a senior director for Binary Defense, a cybersecurity company, and a former FBI computer scientist, emphasized, “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.”
As cryptocurrency scams continue to rise, regulatory bodies encounter the challenge of addressing a sector notorious for its lack of regulation. Consumer education emerges as a crucial tool in mitigating the risks associated with cryptocurrency investments. Moreover, comprehending the tactics employed by scammers and exercising caution when interacting on online platforms can play a vital role in preventing financial losses.