Social Media Blamed for $1 Billion in Crypto Scam Losses in 2021

The U.S. Federal Trade Commission (FTC) has called social media and cryptocurrencies a "fraud-prone combination," with nearly half of all cryptocurrency-related scams originating from social media platforms in 2021.

The FTC report, released on June 3, found that as much as $1 billion in cryptocurrency was stolen by scammers throughout 2021, a more than five-fold increase from 2020 and a nearly 60-fold increase from 2018.

Consumers have reported more than $1 billion in losses to cryptocurrency scams since 2021, new analysis finds. Consumers report most losses from bogus cryptocurrency investment scams

— FTC (@FTC) June 3, 2022

As of March 31, 2022, the amount of cryptocurrency lost is already close to half of what it was in 2021, indicating that the momentum does not seem to be slowing down.

The FTC found that Instagram (32%), Facebook (26%), Whatsapp (9%) and Telegram (7%) were the top platforms used by cryptocurrency scammers to carry out their scams.

Interestingly, Twitter, a social media platform widely adopted by the crypto community, was not mentioned despite being riddled with spam and scam bots peddling fake cryptocurrency giveaways.

According to the FTC’s Consumer Sentinel Network fraud report, the most common type of cryptocurrency scam is investment-related fraud, accounting for $575 million out of a total of $1 billion.

“These scams often falsely promise potential investors that they can make huge returns investing in cryptocurrency schemes, yet people report losing all of their ‘invested’ money.”

A common investment scam, the FTC said, involves so-called "investment managers" contacting consumers with the promise of adding value to their money, but only after the consumer buys cryptocurrency and transfers it to an online account.

Other ways include impersonating celebrities who can multiply any cryptocurrency sent to them by consumers, or promise free cash or cryptocurrency.

The FTC also lists fraud that includes investing in fake art, gemstones and rare coins, fake investment seminars and consultations, and other miscellaneous investment scams.

The second largest loss related to crypto scams came from love scams at $185 million, which refers to a relationship partner's attempt to lure someone into investing in a crypto scam.

Commercial and government impersonation scams came in third, totaling $133 million, in which scammers target consumers claiming their money is at risk due to fraud or government investigations.

"These scams can start with an unauthorized Amazon purchase or with an online pop-up that appears to be a security warning from Microsoft. People have reportedly been told the scam is widespread and their funds are at risk."

The crooks will then pretend to be representatives of the bank to protect the person's cryptocurrency.

In other cases, scammers posing as Border Patrol agents have reportedly told people their fiat accounts had been frozen as part of a drug smuggling investigation. These scammers tell people that the only way to protect their money is to keep it in cryptocurrencies. They were directed to withdraw cash, deposit it into a crypto ATM, and send the cryptocurrency to the scammer's wallet address.

The report found that people between the ages of 20 and 49 were the most likely to be scammed out of cryptocurrency, with those in their 30s suffering the most, accounting for 35 percent of all reported fraud losses.

The amount of cryptocurrency lost rose with age, with people in their 70s reporting a median cryptocurrency loss of as much as $11,708 compared to just $1,000 for 18-19 year olds.

An article on the FTC’s consumer advisory website details some ways to avoid cryptocurrency scams:

Only scammers will ask for payment in cryptocurrency. Legitimate businesses don't ask you to send crypto upfront - not to buy something, and not to protect your money. This is definitely a scam.

Only scammers promise profits or high returns. Don't believe people who promise you can make quick and easy money in the crypto market.

Never confuse online dating with investment advice. If you meet someone on a dating site or app and they want to show you how to invest in cryptocurrencies, or ask you to send them cryptocurrencies, it’s a scam.

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