Investing in Web3, the supposedly “transformative” environment of blockchain and cryptocurrency technologies, continues to be a revolutionary new way to lose a whole lot of money.
A study from the Federal Trade Commission released Friday shows that Americans have lost over $1 billion to crypto-related scams since January 2021. In raw numbers, that’s over 46,000 people who say they have been ripped off—usually with the promise of a fake “investment opportunity” in some sort of Web3-related nonsense. The median amount of cash that got yanked in each individual case was approximately $2,600, the report says, which collected data on reported losses between January 1, 2021, and March 31, 2022.
The rate of ripoffs has been skyrocketing, too: all told, the losses accrued during that 15 month period were some 60 times higher than those reported in 2018. The upsurge is apparently so bad that about one in four dollars stolen via fraud is taken using crypto, according to the report.
In a departure from other cybercrime trends, the FTC notes that younger people—specifically people in their thirties—are the most likely to fall for these kinds of scams. However, older victims have tended to lose more money per incident, with the average individual payout for people in their seventies hovering around $11,708, the report says. The top cryptocurrencies that victims said they used to pay their scammers were Bitcoin, Tether, and Ether.
“Crypto has several features that are attractive to scammers,” the FTC report notes. “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.”
A little over half of the money lost—or $575 million—has gone to “investment scams,” where a supposed web3 entrepreneur reaches out to a target under the pretense of offering them a good deal on an emergent alt-coin or other phony “opportunity.” After bilking them for the fake offering, the scammer then proceeds to run off with the target’s investment cash. A majority of Americans who fell for these scams said that it started with an advertisement or solicitation posted to social media—usually Instagram or Facebook—and then escalated into promises of “easy money.” Of course, the only easy money that ends up getting produced is the money sent from the victim to the scammer.
Another $185 million was reportedly lost last year to “romance” scams—schemes wherein a victim gets mixed up with a crypto swindler via online dating. Meanwhile, an additional $133 million was lost to “business and government impersonation” scams, wherein cybercriminals pretended to be authority figures and then made up bizarre justifications for why a victim needed to invest in cryptocurrency.
It should be noted that these are definitely not the only crypto-related ways to lose a ton of cash! Don’t forget that the occasional hacking episode directed at your DAO, exchange, or “beanstalk” can lead to hundreds of millions of dollars in losses. Also, sometimes (read: a lot of the time), digital currency just ends up being a lousy investment!