Don't Let a Friend Become a Victim of these Cryptocurrency Scams. Here is What You Need to Know to Not Get Slaughtered

Today we need to have an honest discussion about the largest growing scam category. Once you finish learning about it in this podcast, you will have to help spread the word to friends, family, and people you know. Don’t let them become a victim.

Although cryptocurrency has yet to become a mainstream payment method, reports to the Federal Trade Commission show it’s an alarmingly common method for scammers to get peoples’ money. 

Since the start of 2021, more than 46,000 people have reported losing over $1 billion in crypto to scams – that’s about one out of every four dollars reported lost.  That’s more than any other payment method. The median individual reported loss? A whopping $2,600. Bitcoin was the most prevalent requested cryptocurrency by scammers. Seven out of ten requests were for Bitcoin, 10 percent were for Tether and 9% were Ether.

As big as those numbers are, they still don’t give us a complete picture of the scam losses with crypto. The vast majority of frauds are never reported so if we are just looking at reported numbers, it is a small percentage of total losses.  

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. 

Losses continue to accelerate. In the first quarter of 2022, crypto scam reported losses are almost $330 million. If it continues at this rate 2022 should end with about $1.5 billion in reported losses.

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.

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.

During this period, nearly four out of every ten dollars reported lost to a fraud originating on social media was lost in crypto, far more than any other payment method. 

The top platforms identified in these reports were Instagram (32%), Facebook (26%), WhatsApp (9%), and Telegram (7%).

Of the reported crypto fraud losses that began on social media, most are investment scams.

Indeed, since 2021, $575 million of all crypto fraud losses reported to the FTC were about bogus investment opportunities, far more than any other fraud type. 

The stories people share about these scams describe a perfect storm: false promises of easy money paired with people’s limited crypto understanding and experience. 

Investment scammers claim they can quickly and easily get huge returns for investors. But those crypto “investments” go straight to a scammer’s wallet. People report that investment websites and apps let them track the growth of their crypto, but it’s all fake. Some people report making a small “test” withdrawal – just enough to convince them it’s safe to go all in. 

When they really try to cash out, they’re told to send more crypto for (fake) fees, and they don’t get any of their money back.

Romance scams are a distant second to investment scams, with $185 million in reported cryptocurrency losses since 2021 – that’s nearly one in every three dollars reported lost to a romance scam during this period. 

And many have an investment twist too. These keyboard Casanovas reportedly dazzle people with their supposed wealth and sophistication. 

This strategy is called “pig slaughtering.”

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