Thousands of investors have reportedly lost over $1 billion in digital scams since the start of 2021, indicating that the cryptocurrency boom may be coming to an end. CNBC reports that over 46,000 people lost over $1 billion as a result of these digital schemes. This is roughly 60 times the amount of money lost by bitcoin speculators in 2018. Individual losses averaged $2,600.
The Federal Trade Commission (FTC) recently issued a report that went into further depth on the damages these investors suffered as a result of digital scammers. According to the FTC, Bitcoin (70%), Tether (10%), and Ethereum (9%) were the top cryptocurrencies individuals self-reported using to pay fraudsters. One of the most distinguishing characteristics of cryptocurrency transactions is the lack of a method for users to reverse a transaction. There is no chargeback system in place that permits customers to reverse a transaction if they believe they were wrongfully charged for products or services they did not get.
The FTC stated in its report that “Crypto has several features that are attractive to scammers, which may help to explain why the reported losses in 2021 were nearly sixty times what they were in 2018. There’s no bank or other centralized authority to flag suspicious transactions and attempt to stop fraud before it happens. Crypto transfers can’t be reversed – once the money’s gone, there’s no getting it back. And most people are still unfamiliar with how crypto works. These considerations are not unique to crypto transactions, but they all play into the hands of scammers.”
Additionally, the report highlighted that most people who were victimized by these cryptocurrency scams said that it started with social media posts. The FTC explained that “Reports point to social media and crypto as a combustible combination for fraud. Nearly half the people who reported losing crypto to a scam since 2021 said it started with an ad, post, or message on a social media platform.” The top social media apps for scams were Instagram (32%), Facebook (26%), WhatsApp (9%), and Telegram (7%).