Jun 3, 2022 - Economy

Consumers report losing more than $1b from crypto scams, FTC says

People walking past a Bitcoin logo in Prague, Czech Republic, in May 2022.

People walking past a Bitcoin logo in Prague, Czech Republic, in May 2022. Photo: Milan Jaros/Bloomberg via Getty Images

U.S. consumers reported losing more than $1 billion on cryptocurrency-related scams, according to a new analysis from the Federal Trade Commission.

Why it matters: The commission warned that such scams are rapidly becoming more common and are largely carried out through ads or posts on social media platforms.

By the numbers: The FTC said the most common scam was "bogus cryptocurrency investment opportunities," with consumers losing in total $575 million from these since 2021.

  • With these schemes, scammers convince victims that they can get massive returns by investing in a new virtual currency that may or may not exist. It's a modern rendition of a Ponzi scheme, according to the Securities and Exchange Commission.

What they're saying: The FTC said new reports suggest that "cryptocurrency is quickly becoming the payment of choice for many scammers, with about one out of every four dollars reported lost to fraud paid in cryptocurrency."

  • "Reports suggest that cryptocurrency-related scams often begin on social media. Nearly half of consumers who reported a cryptocurrency related scam since 2021 said it started with an ad, post or message on a social media platform," the analysis reads.
  • "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."
  • The FTC warns consumers to look out for people promising major returns on digital currency investments, people demanding crypto payments or for a love interest offering to show them how to invest in crypto.

The big picure: The losses from crypto scams are fairly low in comparison to losses from blockchain hacks or other types of fraud, though cryptocurrencies may be used to facilitate fraud in general.

  • The FTC said in February that people lost more than $5.8 billion to all types of fraud last year.
  • More than $2.3 billion was stolen through imposter scams alone, which involve a scammer convincing the victim to send them money by pretending to be someone they trust.
  • SlowMist Hacked, a blockchain security firm, estimates that, globally, more than $26 billion have been stolen by blockchain hackers since around 2012.

Go deeper: Treasury sanctions cryptocurrency tool tied to North Korean hackers

The Axios Crypto newsletter recently devoted an issue to common scams and ways to protect yourself.

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