The influence of social media and crypto has given rise to a new form of scamming and fraud known as cryptocurrency scams, which have increased in number and severity over the past few years. According to a recent report, nearly $1 billion was lost through cryptocurrency scams in 2021, with an estimated 9 in 10 victims falling prey to fraudsters on Facebook, Twitter, and Instagram.
With cryptocurrencies headed for mainstream adoption and regulations toward the system unclear, those who lose finances as the result of cryptocurrency scams are hoping to recover their funds, but this seems a longshot.
The number of those who fall for these scams continues to increase. This could result because people unfamiliar with cryptocurrency remain in the majority. With irreversible transactions and everyone not aware of the topic to the same degree, scams are more of a threat than ever.
According to the Federal Trade Commission (FTC) in the U.S, the reported losses to crypto-related scams in 2021 were sixty times higher than those in 2018. The estimate is that 46,000 people lost more than $1 billion USD in 2021.
How Cryptocurrency Scams Work
According to the FTC, people fall victim to cryptocurrency scams because the scams begin on social media. Nearly half of the people who reported crypto-related fraud in 2021 said a crypto scammer had contacted them via social media.
The report claims that young investors (ages 20-49) in the US were three times as likely to fall prey to cryptocurrency scammers. Furthermore, thirty-five percent of the fraud reports by people in their 30s are related to cryptocurrencies. There is a connection between the age group and the amount of cryptocurrency lost, as 18 and 19-year-olds lose on average $1,000, ranging up to $11,708 for older age groups.
Not long ago, a typical Ponzi scheme used email to reach potential victims. They would send out messages offering a guaranteed investment opportunity, or touting an exclusive deal with limited availability that could make you thousands. If victims decided to invest, they were asked to wire money via Western Union or MoneyGram. Scammers might have even given victims a toll-free number that routed callers back to an office manned by employees who would talk investors through the investment process to legitimize their offer further. Nowadays, those offers look like cave paintings compared with newer forms of scams involving digital currency trading on social media platforms like Facebook and Twitter.
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Ray Schuetz received a Masters Degree in computer science from The University of Texas (Austin). Ray has been working as a full-time blockchain consultant for the past 3 years. In his spare time, Ray enjoys writing for EthereumCryptocurrency.com and other crypto news publications.