There is perhaps no more certain sign that a currency has reached the financial mainstream than when it is used to scam people out of huge piles of money. That is what is happening with cryptocurrency, according to a new report from the Federal Trade Commission.
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The report, released on June 3, found that since the beginning of 2021, more than 46,000 people have reported losing more than $1 billion in crypto to scams. In terms of the percentage of dollars lost to scams, cryptocurrency trumps any other payment method. Reported losses in 2021 were nearly 60 times the amount just three years earlier.
The median individual reported loss was $2,600 per person. The top cryptocurrencies people said they paid scammers were Bitcoin (70%), Tether (10%) and Ether (9%).
The problem has only gotten worse this year. In 2021, a total of $680 million in crypto fraud was reported to the FTC. In the first quarter of 2022 alone, nearly half that amount was reported: $329 million.
The FTC pointed to several features that make crypto attractive to scammers. The biggest is that no bank or other central authority has been established to flag suspicious cryptocurrency transactions and stop fraud before it happens. Another problem is that once a crypto transaction has taken place, it cannot be reversed.
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Social media is a particularly ripe hunting ground for scammers. Nearly half of people who reported losing crypto to a scam since 2021 said it started with an ad, post or message on a social media platform. Most fraud takes the form of investment scams, with romance scams coming in a distant second, followed by corporate and government scams.
There has been some movement on the part of federal banking regulators — including the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency — to set a roadmap. that would introduce more regulation of cryptocurrencies. But for now, it’s still the Wild West of finance.
In the meantime, what can you do to avoid crypto scams? The FTC offers these tips:
Be wary of crypto investment offers that guarantee profits and big returns† As the FTC points out, no cryptocurrency investment (or any investment) is ever guaranteed to make money, let alone a lot of money. Avoid transactions that require you to buy cryptocurrency. This is almost always a scam. Don’t mix dating and investment advice. If you meet someone and they offer to show you how to invest in crypto, or ask you to send them crypto, you can be pretty sure it’s a scam.
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About the author
Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work has also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He has a BA in English from Appalachian State University and a journalism degree from the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards, and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. Born in North Carolina and also writing fiction, Vance’s short story, “Saint Christopher,” came second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.