Updated Jan 30, 2022 - Economy

Crypto leads to massive surge in online scams

Annual reported losses from fraud originating on social media
Reproduced from FTC; Chart: Axios Visuals

Bogus cryptocurrency investments led to an unprecedented increase in online scams last year, according to new data from the Federal Trade Commission (FTC).

Why it matters: Cryptocurrency is an easy target because while it's surging in popularity, there's still a lot of confusion about how it works.

  • This is especially true among younger people who are digitally savvy but less financially literate.
  • People ages 18-to-39 were more than twice as likely to report losing money to social media scams as older adults last year.

By the numbers: Investment-related scams on social media represented 37% of all reported losses, followed by romance scams and online shopping scams.

  • "People send money, often cryptocurrency, on promises of huge returns, but end up empty handed," the FTC writes.
  • Even if an investment scam didn't occur happen on social media, more than half of the people who reported losses said the scam started on social media.
  • The FTC says one type of crypto scam reported to the agency involves someone bragging about their own success to drive people to bogus investment sites.

Yes, but: While investment scams are by far the most costly for consumers, they aren't the most common. The greatest volume of complaints filed to the FCC came from rackets related to online shopping.

The big picture: Fraud cases from social media now account for roughly 25% of all fraud cases in the U.S., up 18x from 2017.

  • Last year, more than 95,000 people reported losing around $770 million to fraud schemes on social media.

Between the lines: The FTC highlighted the role Facebook and Instagram play in social media fraud, noting that more than a third of people who reported losing money to an online romance scam said it began on one of those platforms.

  • Nearly 9 out of 10 named Facebook or Instagram as the platform in which online shopping scams related to undelivered goods originated, the agency said.
  • "We put significant resources towards tackling this kind of fraud and abuse," said a spokesperson for parent company Meta.
  • "We also go beyond suspending and deleting accounts, Pages, and ads. We take legal action against those responsible when we can and always encourage people to report this behavior when they see it.”

What to watch: The FTC, which regulates advertising, noted in its report that cheap, targeted ads on social media make it easier for fraudsters to hyper-target victims using information like their interests or past purchases.

  • Tech platforms like Google and Facebook restricted crypto-related ads in 2018. Google reinstated them in a limited capacity last summer.

Editor's note: This story was first published on Jan. 27. It has been updated to include a comment from Meta.

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