A new report from the Federal Trade Commission (FTC) highlights crypto scams, warning that potential investors need to be wary of fraudulent offerings in today’s market. From the beginning of last year to May 2021, crypto scams have bilked $1 billion from consumers and the majority of that money has been wasted on bogus investments that were never real.
Consumer data protection spotlight shows massive growth in crypto scams
Crypto fortunes are wavering at present, but crypto scams continue on a strong upward trend on pace to create a record amount of annual loss in 2022.
Losses to crypto scams multiplied by five times from 2020 to 2021, and have seen massive increases since the FTC began logging these numbers in the late 2010s. With $329 million of that $1 billion total taken in the first quarter of this year alone, 2022 looks as if it will smash records for crypto scams once again.
About 46,000 people were hit by crypto scams during the time period covered by the report, and younger adults (under the age of 49) are the most at risk. The risk of being a victim of such a scam is cut by two-thirds for those over the age of 50, but this likely reflects lower interest in crypto among this age group to at least some degree. Adults over the age of 70 were not a frequently scammed group, but when they were hit they lost the greatest amount of money on average ($11,000, over four times the average amount for all victims).
The scammers are generally taking advantage of lack of knowledge of how crypto works. It’s become famous as a way to make a quick fortune, but many people jumping into it do not know all that much about it beyond that. This is the prime group that scammers set their sights on. Crypto scams often make false guarantees of big returns on investment, or ask for some sort of small up-front payment in return for a massive windfall. Scammers are also working dating sites, pretending to be interested in romantic partners while bringing up their investment exploits and eventually working the target into sending money over.
Legitimacy of social media platforms paired with impersonation of legit companies inspires trust in victims
Most of today’s crypto scams involve fake investment opportunities, and almost half of them begin with an offer presented through a social media platform. Almost 60% of all of the crypto scams on social media took place on either Facebook or Instagram, which seem to be by far the most popular platforms for these fraudsters to work. There isn’t really a “standard approach” on these platforms, however; the scammers sometimes target specific users, and other times make general postings or advertisements to cast a wide net.
Scammers abuse the inherent trust people have in social media postings, under an assumption that site moderators will catch and remove materials posted by criminals. Unfortunately, certain sites seem to be struggling to keep up. Another way that crypto scams commonly inspire trust is via the impersonation of known brands, down to copying materials such as web pages and email templates. They even take out ads on these platforms in which they pose as the company in question. The report finds that these scammers most often pose as big companies in the retail and technology sectors.