Investors Lost Record $5.6 Billion to Crypto Scams in 2023, FBI Reports
In 2023, investors lost a record-breaking $5.6 billion to cryptocurrency scams, according to a new report from the FBI’s Internet Crime Complaint Center (IC3). This is a 45% increase from 2022, making it one of the highest losses recorded from financial crime related to cryptocurrencies.
Crypto scams, though only making up 10% of the total financial fraud complaints, accounted for nearly half of the losses reported. The FBI’s report highlights the growing issue of cryptocurrency-related financial crime and warns people to be cautious when dealing with crypto investments.
Crypto Investment Fraud on the Rise
According to the FBI report, investment fraud was the most common and costly type of crypto-related scam in 2023. Out of the 69,000 reports of crypto crimes, nearly half were related to fraudulent investments, with fraudsters stealing about $4 billion from victims.
Crypto investment fraud schemes typically involve scammers promising high returns with little risk. Many of these schemes are designed to trick investors into putting large amounts of money into fake platforms, only to realize they cannot withdraw their funds.
One of the most dangerous types of fraud is known as “pig butchering,” where scammers build a relationship with their victims over time, often through messaging apps, before persuading them to invest in a fake cryptocurrency platform. By the time the victim realizes it’s a scam, they’ve often lost a significant amount of money.
Who Is Most at Risk?
The FBI report also showed that victims between the ages of 30 and 49 filed the most complaints about investment fraud in 2023. However, people over the age of 60 lost the most money, with their losses totaling over $1.24 billion. This means that while younger people may be falling for scams more frequently, older people are losing the most money when they do.
California was the state with the highest number of crypto fraud complaints. In 2023, residents in California filed 9,522 complaints and lost a total of $1.2 billion. The U.S. overall accounted for 83% of all crypto-related fraud reports filed last year, highlighting the need for increased awareness and protection for American investors.
Pig Butchering Scams: A Growing Threat
The FBI’s report draws special attention to “confidence-enabled” schemes, also known as pig butchering. In these scams, fraudsters manipulate their victims by gaining their trust over long periods of time. Scammers often meet their victims on social media or dating platforms, where they slowly build a relationship, and then convince them to invest in a fake cryptocurrency platform.
Victims often don’t realize they’ve been scammed until it’s too late. These scams are particularly dangerous because of how personal and manipulative they are. Victims are not just losing money, but are also often left feeling betrayed by someone they trusted.
Many victims of pig butchering scams have accumulated large amounts of debt to try and recover their losses, only to be trapped in the scam even deeper. The FBI advises investors to be extremely cautious of anyone who asks them to invest in a platform they haven’t verified.
Human Trafficking and Crypto Scams
One disturbing detail from the FBI report is the connection between crypto scams and human trafficking. An investigation by ProPublica in 2022, later confirmed by the United Nations, found that many of the people running these crypto scams are actually victims of human trafficking.
These individuals are often held in scam compounds across Southeast Asia, where they are forced to participate in fraudulent operations. The scam workers are recruited through false job ads and are then held against their will, forced to work off large debts by scamming people into fraudulent crypto investments.
These scam operations are particularly hard to combat because they involve both human trafficking and financial crime, creating a complex situation for law enforcement. The FBI is warning U.S. citizens traveling abroad to be cautious of false job advertisements, especially in Asia, as they could be linked to labor trafficking.
The Role of Cryptocurrency in Financial Crime
Cryptocurrency has become a favorite tool for criminals because of its decentralized nature, fast transactions, and difficulty in tracing or recovering funds. As a result, scammers have turned to cryptocurrencies to carry out fraudulent activities without fear of getting caught easily.
Investment fraud, in particular, has skyrocketed with the rise of cryptocurrency. Scammers can create fake platforms or accounts, promise large returns on investment, and then disappear with investors’ money. Victims are left with no way to recover their funds, as crypto transactions are irreversible.
In addition to investment fraud, other types of scams have emerged in the crypto space. These include tech support scams, where scammers pretend to be customer service agents to steal money or personal information, and government impersonation fraud, where scammers claim to be from official agencies to trick victims into sending them cryptocurrency.
Protecting Yourself From Crypto Scams
The FBI’s report emphasizes the importance of protecting yourself from cryptocurrency scams. One of the best ways to stay safe is to verify any investment opportunity before sending money. Be cautious of offers that seem too good to be true, especially if they promise high returns with little risk.
It’s also important to avoid sending upfront payments for services that promise to recover lost funds. Many scammers prey on victims by offering “recovery services” after they’ve already been scammed, asking for more money in exchange for getting their initial investment back. These recovery schemes are almost always fraudulent, and victims end up losing even more money.
To avoid falling victim to crypto scams, the FBI recommends staying informed about the latest types of fraud and learning how to spot warning signs. Always be cautious when dealing with unknown platforms, and never invest more than you can afford to lose.
Crypto Fraud by the Numbers
The FBI report breaks down the data on cryptocurrency fraud by age, location, and type of scam. Victims over 60 experienced the highest financial losses, losing over $1.6 billion in 2023 alone. This is likely because older people are often less familiar with cryptocurrencies and the risks involved in investing.
The report also highlights the geographical distribution of crypto fraud. California had the most complaints and the highest total losses, with over 9,000 complaints and $1.2 billion in reported losses. Other states with high numbers of complaints included Texas, Florida, and New York.
Globally, the U.S. led in the number of complaints and total losses, accounting for 83% of all crypto-related fraud reports in 2023. This suggests that American investors are a primary target for scammers, who exploit the popularity of cryptocurrency in the U.S. market.
The FBI’s Response to Crypto Scams
To combat the growing issue of cryptocurrency fraud, the FBI has created the Virtual Assets Unit (VAU). This unit is responsible for investigating and prosecuting cryptocurrency-related crimes. The VAU works closely with other law enforcement agencies to track down scammers and recover stolen funds.
The FBI also encourages victims of crypto fraud to file complaints as soon as possible. Timely reporting can help law enforcement identify patterns and track down the criminals responsible. Victims can file reports through the Internet Crime Complaint Center (IC3) to assist the FBI in their investigations.
In addition to investigating fraud, the FBI provides resources for victims, including tips on how to avoid falling victim to scams. The agency stresses the importance of staying educated about the risks of cryptocurrency and being cautious when investing in unverified platforms.
The FBI’s 2023 report paints a concerning picture of the rise in cryptocurrency scams. Investors lost a record $5.6 billion, with investment fraud accounting for the majority of the losses. The report serves as a warning to investors to be cautious and stay informed about the risks of cryptocurrency. By following best practices and being aware of common scams like pig butchering, investors can protect themselves from becoming the next victim of crypto fraud.
