Keeping up with the rise and fall of cryptocurrency prices is a turbulent enough endeavour. However, volatility is not the only danger. According to US Federal Trade Commission (FTC) data, cryptocurrency scams have soared 1,000% since October 2020.
Consumers in the US have reported losing more than $80m to cryptocurrency investment scams, increasing more than ten-fold year-over-year (YoY) in a span of six months. People between the ages of 20 and 39 were hit particularly hard, representing about 44% of the reported losses, said the FTC.
The analysis breaks down the contents of nearly 7,000 reports received from consumers about cryptocurrency scams in the last quarter of 2020 and the first quarter of 2021. The median amount consumers reported losing was $1,900.
Cryptocurrency investment scams take on a variety of forms, sometimes starting as offers of investment “tips” or “secrets” in online message boards that lead people to bogus investment websites, the FTC warns.
Another common form of the scam involves a promise that a celebrity associated with cryptocurrency will multiply any cryptocurrency you send to their wallet and set it back. In fact, consumers reported losing more than $2m to Elon Musk impersonators alone since October.
The Tesla CEO’s identity has become the go-to front of operations for crypto con artists – notably for bitcoin scammers. These scams usually see verified accounts hijacked to imitate the billionaire entrepreneur’s Twitter profile.
The impersonator then uses this clone profile to reply to a Musk tweet to promote a ‘crypto giveaway’. Users are asked to send a small amount of cryptocurrency – usually bitcoin or ethereum – to “verify” their account as it were. The scammer promises to send back up to ten times that amount, but none is returned.
In 2018, Verdict observed a spate of these crypto scams on Twitter. In one case, a professional golf long driver had his account hacked to spread the scam on a Musk tweet in which he declared his love for ramen.
The FTC emphasises that “one sure sign of a scam is anyone who says you have to pay by cryptocurrency. In fact, anyone who tells you to pay by wire transfer, gift card, or cryptocurrency is a scammer.”
Digital currencies have moved from being a fringe business to taking up front-page headlines in recent financial news. Although considered a highly unstable form of money by many experts, bitcoin reached a record high price of nearly $50,000 in February, in part because more companies are accepting it as a form of payment.
According to Bitcoin’s website, Microsoft, Starbucks and Whole Foods are a few of the major retailers that now accept bitcoin as payment.
Tesla CEO Musk famously played a significant role in promoting the cryptocurrency. Earlier this year, he announced that Tesla would accept bitcoin as a means of payment for its electric vehicles, only to backtrack on this decision last week.