Americans were tricked out of a record $5.6 billion through cryptocurrency fraud in 2023, a 45% increase from 2022, according to a recent FBI report. Nearly 70,000 complaints were filed in 2023, with investment scams accounting for $3.96 billion of the losses, and the true figure may be much higher due to unreported cases.
According to FBI Assistant Director Michael Nordwall, the decentralized nature of cryptocurrency and its quick, irreversible transactions make it a prime target for criminals. Scammers use dating apps and social media to build trust before convincing victims to invest in fake crypto platforms. Some victims are even scammed a second time by fraudulent businesses promising to recover their stolen funds. The FBI urges caution when approached with investment opportunities by strangers.
“The decentralized nature of cryptocurrency, the speed of irreversible transactions, and the ability to transfer value around the world make cryptocurrency an attractive vehicle for criminals, while creating challenges to recover stolen funds,” the report says. This is the first-ever Cryptocurrency Fraud Report released by the agency.
People 60 years and older lost the most money in cryptocurrency scams, according to the report. The older demographic filed more than 16,000 complaints of cryptocurrency fraud and reported losing over $1.6 billion in 2023. Ppeople under 20 had the fewest reported complaints with 858 complaints totaling almost $15 million.
In addition to investment fraud, other forms of cryptocurrency scams detailed in the report included identity theft, extortion and tech support scams.
“These schemes offer individuals large returns with the promise of minimal risk,” the FBI said in the report. “Over the years, cryptocurrency’s widespread promotion as an investment vehicle, combined with a mindset associated with the ‘fear of missing out,’ has led to opportunities for criminals to target consumers and retail investors — particularly those who seek to profit from investing but are unfamiliar with the technology and the attendant risks.”
The vast majority of the reported losses ($4.8 billion) were incurred by U.S. citizens, followed by Cayman Islands ($196M), Mexico ($127M), Canada ($72M), the UK ($59M), India ($44M), and Australia ($25M).
The IC3 report explains that cybercriminals target cryptocurrency because of its decentralized nature, the existence of mechanisms that can help obscure the money trace, and the victim’s inability to revert fraudulent transactions.
Cryptocurrency holders can protect themselves from fraud by following these recommendations in the report:
- Criminals will seek to instill a sense of urgency and isolation.
- When receiving an unsolicited call by an unknown caller claiming to work for a well-known company or government agency, hang up and independently research the company or agency’s publicly published phone number and call it to confirm the authenticity of the original call.
- No legitimate law enforcement or government official will call to demand payment via a cryptocurrency kiosk.
- Never give personally identifying information to anyone without verifying the person is who they say they are.
- Verify the validity of any investment opportunity strangers or long-lost contacts offer on social media websites. If you have never met an individual in real life, even if you have spoken on the phone or video chatted, be very cautious of accepting investment advice or opportunities.
- Be on the lookout for domain or website names that impersonate legitimate financial institutions, especially cryptocurrency exchanges.
- Fraudulent businesses often use website addresses that mimic real financial institutions, but are often slightly different, to convince people the fraudulent website is legitimate.
- Do not download or use suspicious-looking apps as a tool for investing unless you can verify the legitimacy of the app.
- If an investment opportunity sounds too good to be true, it likely is. Be cautious of get rich -quick schemes.
- Investment involves risk. Individuals should invest based on their financial objectives and financial resources and, if in any doubt, should seek advice from a licensed financial adviser
