New data spotlight points to more than ten-fold increase in reported losses in last 12 months
Since October 2020, consumers have reported losing more than $80 million to cryptocurrency investment scams, an increase of more than ten-fold year-over-year, according to a new data analysis from the Federal Trade Commission.
In a new consumer protection data spotlight, the FTC breaks down the contents of nearly 7,000 reports received from consumers about these scams in the last quarter of 2020 and the first quarter of 2021. The median amount consumers reported losing to the scams was $1,900.
The spotlight notes that cryptocurrency investment scams take on a variety of forms, sometimes starting as offers of investment “tips” or “secrets” in online message boards that lead people to bogus investment websites. Another common form of the scam involves a promise that a celebrity associated with cryptocurrency will multiply any cryptocurrency you send to their wallet and send it back. In fact, consumers reported losing more than $2 million to Elon Musk impersonators alone since October.
The spotlight notes that consumers age 20 to 49 were over five times more likely than older age groups to report losing money to a cryptocurrency investment scam, and that in the six-month period covered by the spotlight, consumers in their 20s and 30s lost more money to investment scams than any other form of fraud. More than half of their investment scam losses were in cryptocurrency.
The FTC has more information for consumers about cryptocurrency investment scams, and how to avoid them, at ftc.gov/cryptocurrency.
Cryptocurrency investment scam reports at record level: 5 facts suggest caution
By: Lesley Fair | May 17, 2021
Thinking about adding cryptocurrency to your investment portfolio? The number of Americans investing in cryptocurrency has increased. But as a new FTC Consumer Protection Data Spotlight suggests, the number who report getting stung by cryptocurrency investment scams has skyrocketed. You’ll want to read the Data Spotlight in detail, but here are five facts that suggests caution before sinking your savings into cryptocurrency.
- Consumers report losing millions to cryptocurrency scams. Since October 2020, nearly 7,000 consumers have reported losses to cryptocurrency scams totaling more than $80 million with a reported median loss of $1,900. Compared to the same period a year earlier, that’s about 12 times the number of reports and nearly 1,000% more in reported losses.
- Cryptocurrency scammers blend into the scene. Cryptocurrency enthusiasts tend to congregate online to talk about their shared interest. But reports from defrauded consumers suggest that some sites can raise concerns. Is the author of that post just a friendly person sharing an investment “tip” or is he or she part of a ploy to draw consumers into a scam? Prospective investors also need to take supposed “success stories” from endorsers with a hearty helping of salt. There’s no way to verify they’re telling the truth.
- A celebrity’s name is no guarantee of legitimacy. Crypto crooks may try to cover their con by stealing the name of a newsmaker or business leader – for example, by falsely claiming the celebrity will “multiply” the cryptocurrency a consumer sends. Case in point: In just the past six months, people have reportedly sent more than $2 million in cryptocurrency to Elon Musk impersonators.
- (Cyber) romance and (crypto) finance can be a combustible combination. Fraudsters have been known to use the artifice of long-distance love to gain a person’s trust only to reel them into a cryptocurrency investment scam. According to the Data Spotlight, about 20% of the money people reported losing through romance scams since October 2020 was sent in the form of cryptocurrency – and many of them thought they were making an investment recommended by their supposed sweetheart.
- Younger investors may be at particular risk. Since October 2020, people between 20 and 49 were over five times more likely to report losing money to cryptocurrency investment scams than older consumers. What’s more, those in their 20s and 30s reported losing far more money on investment scams than on any other type of fraud – and more than half of their reported investment scam losses were in cryptocurrency. But that doesn’t mean that consumers over 50 weren’t affected, too. Members of that age group were far less likely to report losing money on cryptocurrency investment scams. However, when they did lose money, their individual losses were higher, with a reported median loss of $3,250.