Reports have shown that more than 46,000 people have reported losing over $1 billion in cryptocurrency scams since the start of 2021. This report was compiled by the Federal Trade Commission (FTC) on Friday.
Nearly half the people who reported losing digital currencies in a scam said it started with an ad, post or a message on a social media platform, according to the FTC.
The craze for cryptocurrencies was at a fever pitch last year with bitcoin hitting a record high of $69,000 in November.
Reports point to social media and crypto as a combustible combination for fraud, the agency said, adding that about $575 million of all losses related to digital currency frauds were about “bogus investment opportunities”.
Nearly four out of every ten dollars lost in a fraud originating on social media was lost in crypto, far more than any other payment method, with Instagram, Facebook, WhatsApp and Telegram being the top social media platforms in such cases, according to the report.
The average reported loss for an individual was $2,600 and bitcoin, tether and ether were the top cryptocurrencies that people used to pay scammers, the FTC said.
Romance scams are the second-most common source of crypto fraud losses, followed by business and government impersonation scams, which the FTC said can often start with fake messages purporting to be from tech companies like Amazon or Microsoft.
Younger consumers were more likely to be taken in by crypto scams. The FTC reports that people aged 20 to 49 were more than three times as likely as older age groups to report losing crypto to a scammer.
To avoid being scammed, the FTC says, people should understand that cryptocurrency investments never have guaranteed returns, avoid business arrangements that require a crypto purchase, and watch out for romantic come-ons accompanied by a crypto solicitation.
The news comes after a tumultuous few weeks in the crypto markets. A failed U.S. dollar-pegged stablecoin helped drag down the entire crypto asset class, erasing half a trillion dollars from the sector’s market cap and denting investor confidence in the process. Many institutional and retail investors got wiped out, and for the most part, there are no backstops from the FDIC, nor any other consumer insurance protections.
Billionaire bitcoiners Cameron and Tyler Winklevoss recently announced layoffs at crypto exchange Gemini, citing the fact that the industry is in a “contraction phase” known as “crypto winter,” which has been “further compounded by the current macroeconomic and geopolitical turmoil.”
