Highlights:
- Cryptocurrency fraud surged 45% in 2023, with losses totaling $5.6 billion.
- Senior victims lost more than $1.6 billion to crypto scams, while younger individuals faced losses totaling $168 million.
- FBI warns of rising scams involving crypto ATMs and fraudulent games.
The Federal Bureau of Investigation’s (FBI’s) Internet Crime Complaint Center (IC3) reported that Americans lost $5.6 billion to crypto fraud in 2023, a 45% increase from 2022. The IC3 received more than 69,000 complaints involving financial crimes linked to cryptocurrencies like Bitcoin, Ethereum, and Tether. Individuals over the age of 60 were the most frequently targeted, contributing to nearly $1.6 billion in losses.
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Investment schemes comprised almost 71% of the crypto fraud cases, while around 10% were linked to call center scams and government impersonation frauds. Although crypto-related complaints made up just 10% of all financial fraud reports, they accounted for nearly half of the total losses. The agency reported a dramatic 53% rise in losses from crypto-related investment fraud schemes, with total losses surging from $2.57 billion in 2022 to $3.96 billion in 2023.
Americans lost $5.6 billion in crypto scams in 2023—and accounted for 50% of total losses from financial fraud—according to a new report published Monday by the FBIhttps://t.co/m1XwafLjCE pic.twitter.com/wDFD9gv9li
— Leo Schwartz (@leomschwartz) September 9, 2024
FBI Warns of Rising Crypto Scams
The decentralized structure of cryptocurrencies, along with their fast, irreversible transactions and the ease of transferring funds worldwide, has made them an attractive target for criminal activities.
Confidence Schemes in Cryptocurrency
The FBI received complaints from more than 200 countries, yet the majority of these complaints and losses came from the United States. Many of the losses were due to confidence schemes.
FBI stated:
“There is one thing these scammers typically will not do — they will not meet with you in real life. If an investment opportunity comes from someone who you have never met in person […] be extremely cautious of the advice.”
Crypto ATMs Scams
Kiosks (automated teller machines) offer numerous opportunities for scammers. The FBI reported 5,500 cases involving kiosks, resulting in losses exceeding $189 million. Scammers favor kiosks over banks because of the anonymity of ATM transactions. Complaints related to kiosk transactions include issues with customer service, government impersonation, extortion, romance scams, and other fraudulent schemes.
Labor Trafficking and Pig Butchering Scams
The FBI also cautioned that Americans could fall victim to labor trafficking, where individuals are lured into jobs abroad, such as in call centers, that turn out to be exploitative. Pig butchering scams are frequently operated from these call centers using foreign labor. Employers may demand reimbursement for expenses like room and board and could confiscate the worker’s passport or other documents.
Liquidity Mining Scams
Among the latest fraudulent schemes, “liquidity mining scams” have become increasingly common. In legitimate liquidity mining, investors stake their cryptocurrency in a liquidity pool to aid transactions, receiving a share of the trading fees in return. Scammers, however, have exploited this concept, especially targeting holders of popular cryptocurrencies like Tether and Ethereum.
Fraudsters often establish a rapport with their targets over days or weeks, persuading them to connect their cryptocurrency wallets to a fake liquidity mining platform with promises of daily returns between 1-3%. Once the wallet is linked, the hackers drain the victims’ funds without their consent.
Fraudulent Play-to-Earn Gaming Applications
A new trend involves “fraudulent play-to-earn gaming applications,” where criminals lure victims by advertising games that promise cryptocurrency rewards. They begin by forming an online relationship with the target and then introduce them to a game where they can earn cryptocurrency through activities like growing virtual crops. To join, players must create and fund a cryptocurrency wallet. The scammers push them to deposit more money as they play and watch their in-game rewards grow.
The sharp rise in crypto fraud cases has heightened concerns about consumer trust in digital assets and led to increased regulatory scrutiny. Authorities are intensifying efforts to combat fraud within the crypto sector. Additionally, the FBI recently warned crypto firms and Bitcoin ETF issuers about potential attacks from North Korean hackers. Despite these challenges, cryptocurrency remains a growing and legitimate investment option.
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