Crypto scams have taken $1 billion from consumers since January 2021, 60 times more than in 2018, with losses on track to equal or exceed in the next accounting. The $1 billion in losses were divided among about 46,000 victims, with a median loss of $2600 for each individual.
The stock market has lately been providing a reminder to consumers that you can make money with stocks but you can also lose it. Such losses are painful but not often catastrophic, which isn’t the case with cryptocurrency, as the Federal Trade Commission reminds us in a new report.
It’s not too surprising that so many consumers have lost so much so quickly. Simply put, crypto scams are growing as quickly as the marketplace for crypto currencies, and many of those putting their money at risk are relative newcomers to investing and not as cautious as more seasoned investors.
In fact, says the FTC, crypto scams are becoming the go-to choice of top scam artists, simply because it is still a wide-open field, with many potential victims frustrated by lackluster earnings in the traditional marketplace.
Perhaps surprisingly, the analysis found that younger consumers were more likely to be victims. People ages 20 to 49 were more than three times as likely as older age groups to have reported losing money to a cryptocurrency scam. Older age groups, however, reported losing more money when they did report a cryptocurrency-related scam.
Many crypto scams start out on social media, with nearly half of victims since 2021 saying it all started with a social media ad, post or message.
How to avoid crypto scams
The FTC lists some red flags that potential crypto investors should watch out for:
- anyone who claims they can guarantee profits or big returns by investing in cryptocurrency;
- people who require you to buy or pay in cryptocurrency; and
- a love interest who wants to show you how to invest in cryptocurrency or to send them cryptocurrency.
By the way, it’s not just investing in cryptocurrency that’s risky. Using it to buy goods or services also opens you up to risk, simply because you have no recourse if the deal goes bad. It’s similar to using Zelle, Venmo or other cash transfer services to pay people you don’t know personally.
“There’s no bank or other centralized authority to flag suspicious transactions and attempt to stop fraud before it happens. Crypto transfers can’t be reversed – once the money’s gone, there’s no getting it back,” the FTC cautions.
Isn’t it romantic?
While most crypto scams involve investments, romance is running a strong second, with $185 million in reported cryptocurrency losses since 2021. Many have an investment twist too. Scammers dazzle their victims with their supposed wealth and sophistication. Before long, they casually offer tips on getting started with crypto investing and help with making investments.
“People who take them up on the offer report that what they really got was a tutorial on sending crypto to a scammer. The median individual reported crypto loss to romance scammers is an astounding $10,000,” the FTC cautions.