Online thugs have defrauded more than 46,000 people in crypto scams since the start of 2021. Many of these cons started on social media platforms run by Meta and Telegram, according to the US Federal Trade Commission (FTC).
The market watchdog’s new report states that thousands of victims reported losses worth north of $1.1bn to scams originating on social media platforms. These loses were roughly 60 times the levels seen back in 2018. The market watchdog estimates that the median victim lost a whopping $2,600.
Bitcoin was the most common cryptocurrency used to pay scammers, with 70% of the victims reporting having used the digital asset to as a payment method. It was followed by stablecoin tether, which was used in 10% of the scams. Ether was used in 9% of the scams.
Victims told the antitrust regulator that the majority of the crypto scams started on platforms owned by Meta. Instagram was the most popular place for online scammers. Thirty-two per cent the cases reported to the FTC originated on Instagram. It was followed by Facebook and WhatsApp, where 26% and 9% of the cases started respectively. Apart from the Meta apps, 7% victims of crypto scams said the fraud originated on Telegram.
“A perfect storm”
The spike in crypto scams is hardly surprising. It’s no secret that the cryptocurrency industry surged in popularity during the pandemic.
Digital assets like bitcoin saw their valuations jump to record heights over the course of Covid-19, reaching record levels in November in 2021, before plunging to new lows at the start of 2022.
The free-falling valuations precipitated talks of an looming cryptocurrency winter. The volatility of digital assets in the past few months have done little to dissuade this talk.
Still, that doesn’t negate from the record venture capital investment levels seen in the cryptocurrency space over the past two years. VC backers splurged over $26.2bn into these projects in 2021, up from the $3.3bn injected into the sector in 2020, according to data from research firm GlobalData.
At the same time, companies like Coinbase went public. Moreover firms Crypto.com and FTX advertised at the Super Bowl. In short, cryptocurrencies have been in the public eye. Regular Joes have taken notice. They understandably want to get in on the action. However, that's when the scammers have pounced.
Investment scams where unsurprisingly the biggest type of fraud reported to the FTC. In these scams criminals present the victims with bogus investment opportunitie. Of the $1.1bn lost through crypto scams on Meta and Telegram social media sites, $575m were lost to this category.
"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," Emma Fletcher, senior data researcher at the FTC, wrote in a blog. "Investment scammers claim they can quickly and easily get huge returns for investors. But those crypto 'investments' go straight to a scammer’s wallet."
Everything's unfair in love and crypto
Romance scams were the second most popular con used by criminals. Since 2021, $185m have been lost to these scams. Romance scams follow a pattern anyone who has watched the Tinder Swindler will be familiar with, albeit with a crypto twist.
"These keyboard Casanovas reportedly dazzle people with their supposed wealth and sophistication," Fletcher explained. "Before long, they casually offer tips on getting started with crypto investing and help with making investments. People who take them up on the offer report that what they really got was a tutorial on sending crypto to a scammer. The median individual reported crypto loss to romance scammers is an astounding $10,000."
Business and government imposters were the third and fourth biggest categories reported by victims of crypto scams to the FTC. Business imposter scams saw people lose $93m to fraudsters between January 2021 to March 2022. During the same period, $40m was lost to government imposters.
The victims of the crypto scams were relatively young. The FTC estimated that People aged between 20 and 49 were more than three times as likely as older age groups to have reported losing cryptocurrency to a scammer, with victims in their 30s as the hardest hit – 35% of their reported fraud losses since 2021 were in cryptocurrency
Meta and Telegram have history of crypto scams
Neither Meta nor Telegram returned Verdict's requests for comment ahead of the publication of this story. However, this is hardly the first time either of those companies have been at the centre of cryptocurrency controversies.
Facebook reversed a 2018 ban against crypto ads in December 2021. It motivated the reversal by saying that "the cryptocurrency landscape has continued to mature and stabilize in recent years and has seen more government regulations that are setting clearer rules for their industry."
The decision could've come back to bite Meta. The Australian Competition & Consumer Commission (ACCC) sued the Facebook owner in March this year. The ACCC alleged that the company had broken investment rules and regulations prohibiting false, misleading or deceptive conduct.
Meta denied responsibility and said it worked hard to detect and block crypto scams that violate its policies, as TechRadar reported.
Similarly, Telegram has repeatedly been identified as a hotbed for crypto scams. A Business Insider missive from February warned that cryptocurrency scammers increasingly use bots to make Telegram users give up their one-time-passwords, lock the user out of their account and then clean house. Similar bots have been used on other platforms too.
Telegram has also faced criticism of hosting channels seemingly devoted to teaching their members how to commit fraud.
It is not just Meta and Telegram that have been used for crypto scams: other social media platforms have also used by fraudsters. 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 has warned against crypto scams in the past, warning that "anyone who tells you to pay by wire transfer, gift card, or cryptocurrency is a scammer.”
The market watchdog now adds to the advice, saying that there are three ways to spot and avoid falling foul of a crypto con.
"Only scammers will guarantee profits or big returns," Fletcher wrote. "No cryptocurrency investment is ever guaranteed to make money, let alone big money."
She added that nobody "legit will require you to buy cryptocurrency" and urges people to never "mix online dating and investment advice."
"If a new love interest wants to show you how to invest in crypto, or asks you to send them crypto, that’s a scam," Fletcher concludes.