Investors lost over $1 billion in crypto scams last year, FTC says

    09 Jun 2022

    In a report released Friday, the Federal Trade Commission (FTC), the enforcer of civil US antitrust law, revealed that the investors had lost over $1 billion in crypto-related scams, which have been growing due to a lack of regulations and proper education on digital assets. Bitcoin, Tether, and Ether become the top cryptos involved in scams in the report, while Instagram, Facebook, WhatsApp, and Telegram housed the most scam cases.

    From the start of 2021, more than 46,000 people have reported losing over $1 billion in crypto to scams which is higher than any other payment method, the FTC report said.

    Thus, the median individual reported loss came out to be a “whopping” $2,600. Top cryptocurrencies that investors paid scammers with include Bitcoin (70%), Tether (10%), and Ether (9%).

    “Crypto has several features that are attractive to scammers, which may help to explain why the reported losses in 2021 were nearly sixty times what they were in 2018. There’s no bank or other centralized authority to flag suspicious transactions and attempt to stop fraud before it happens,” the FTC report stated.

    Further, FTC noted that since blockchain transactions cannot be reversed and are untracked, scammers can make away with the money. Furthermore, many people are not familiar with crypto investments, and hence, investors play into the hands of scammers.

    The FTC also noted in the report that “nearly four out of every ten dollars reported lost to a fraud originating on social media was lost in crypto, far more than any other payment method,” and the top platforms include Instagram (32%), Facebook (26%), WhatsApp (9%), and Telegram (7%). Most of the scams were investment scams that promised high returns for low principles.

    “Some people report making a small “test” withdrawal – just enough to convince them it’s safe to go all in. When they really try to cash out, they’re told to send more crypto for fake fees, and they don’t get any of their money back,” the report warned.

    In February, a federal grand jury in San Diego indicted the founder of BitConnect for allegedly orchestrating a $2.4 billion global Ponzi scheme. The founder was accused of misleading investors about the cryptocurrency’s “lending program,” claiming the company’s proprietary technology would bring substantive returns to investors by tracking cryptocurrency exchange markets.

    And in May, the CEO of Mining Capital Coin was indicted for “allegedly orchestrating a $62 million global investment fraud scheme” that promised sizable returns from mining new cryptocurrencies.

    In both cases, scammers promised substantial returns to their investors, but instead pocketed the money into their own crypto wallets.

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