Victims have lost over $1 billion in cryptocurrency scams between January 2021 and March 2022 according to a report released by the Federal Trade Commission on Friday.
Over 46,000 people have lost money in crypto fraud since the beginning of 2021 making it the leading source of payment scams. Bitcoin made up 70% of crypto-related scams followed by tether at 10% and Ethereum at 9%.
“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,” according to the report.
Further, nearly four out of every ten dollars stolen originated from social media. Meta-owned Instagram, Facebook and WhatsApp led the way originating 32%, 26% and 9% of all the fraud in the report, respectively. Telegram came in at 7%.
Fake investments were by far the largest type of fraud that started on social media with $575 million being reported to the FTC during the time period. This type of scam allegedly starts with a promise of huge returns for investors and preying on people’s limited understanding of cryptocurrency.
Romance scams came in second to investment fraud with $185 million reported in losses since 2021. According to the FBI, romance scams occur when a criminal creates a fake online identity to gain a victim’s affection and trust then proceeds to manipulate and steal from the victim. Crypto scams reached an all-time high last year of $14 billion, according to a Chainalysis report, but that’s only 0.15% of the total crypto transactions.
Unlike traditional banks, there’s no formal way to flag suspicious activity and it’s only possible to reverse transactions with a private-key that’s difficult to acquire. This paired with people’s limited knowledge of cryptocurrency results in many people being scammed daily. The rising incidence of fraud has triggered renewed interest in stricter regulation.