Cryptocurrency investment scams are leading to growing financial losses

It started with a text message, seemingly meant for someone else. Ed Hayduk, a Pennsylvania resident, replied.

The Economic Times reports on rising cryptocurrency scam losses.

People are losing an alarmingly high amount of money to cryptocurrency scams, according to the FBI’s 2023 Cryptocurrency Fraud Report.

While cryptocurrency-related complaints represent about 10% of the total financial fraud complaints the FBI received during 2023 (the most recent data available), they account for nearly half of all financial losses, the report said.

The cryptocurrency-related complaints to the FBI’s Internet Crime Complaint Center in 2023 resulted in an estimated loss of over $5.6 billion, an increase of about 45% from 2022.

The trend has continued into 2024, with Federal Trade Commission data showing $5.7 billion in losses due to investment scams, more than any other category.

The analysis of the FBI’s 2023 Internet Crime Report and the supplementary Cryptocurrency Fraud Report by CheapInsurance.com, which provides a comparison website for various insurance policies, delves into how crypto-related crimes cause the biggest losses.

Crypto-related crimes are a growing concern, as evident from the FBI’s report. In 2023, there was a 20% increase in cybercrime complaints compared to the previous year, with a staggering 1.3 million complaints and estimated losses exceeding $10.3 billion.

Among the various categories of cybercrime, crypto-related crimes saw the highest escalation in both complaints and losses. Out of the total financial fraud complaints, cryptocurrency-related complaints accounted for about 10%, a slight decrease from last year. However, these complaints resulted in nearly half of the estimated financial losses.

Moreover, the average loss due to cryptocurrency fraud was around $90,772, significantly higher than the average loss from any other category of cybercrime. In contrast, the average loss due to romance scams, the second highest, was $70,000.

The significant losses due to crypto scams can be attributed to the fact that victims often start with small investments that gradually escalate. In many cases, the scammers disappeared after the victims had invested a large sum.

The FBI report highlights that nearly two-thirds of crypto-related scam victims were Generation X, born between 1965 and 1980, and had an annual income of $150,000 or more. Additionally, about two-thirds of the victims had a college degree.

The scammers used various methods to deceive their victims, with messages on social media and dating apps being the most common avenues.

The scammers typically began by making small talk and got to know their victims. Over time, they introduced the topic of crypto investment, starting with a small sum.

Later, fake statements from crypto exchanges showing high returns on the initial investment were used to persuade the victims to invest more.

Finally, after the victims had invested a large sum, usually around $50,000, the scammers disappeared without a trace.