In a recent report by the FBI, it was revealed that American citizens lost over $2.5 billion to cryptocurrency-related scams in 2022, marking a significant increase compared to previous years. A 45% increase brings the total losses to a staggering $5.6 billion.  As digital assets gain mainstream popularity, so do the number of fraudulent schemes targeting investors.

The FBI’s findings are part of its Internet Crime Complaint Center (IC3) report, which highlighted a sharp rise in crypto scams. The primary schemes that ensnared victims included phishing attacks, fake investment platforms, social media cons, and impersonation of legitimate companies. Cryptocurrency scams were among the top financial frauds reported in the past year.

The Most Common Cryptocurrency Scams

According to the FBI, the scams that American citizens fell victim to typically involved several strategies:

1. Fake Investment Platforms: Fraudsters often lure victims to invest in fraudulent cryptocurrency platforms promising high returns. After the victims invest, they are allowed to see their balances grow rapidly. However, when they attempt to withdraw their funds, they are met with excuses, additional fees, or complete silence, leaving them with no way to access their money.
2. Impersonation Scams: In some cases, scammers impersonate well-known financial institutions, celebrities, or cryptocurrency companies. They might send emails or messages on social media promoting fake crypto “giveaways” or investment opportunities, capitalizing on the trust people place in these familiar names.
3. Romance Scams: These scams often begin on dating apps or social media. Scammers build relationships with their victims, eventually convincing them to invest in cryptocurrency ventures. Victims are coerced into transferring large sums of money to fraudulent accounts under the belief that they are helping their new “partner” or securing a future together.
4. Phishing Scams: Phishing attacks target crypto holders through deceptive emails, websites, or text messages. Victims are tricked into providing login credentials or private keys to their digital wallets, which are then accessed by scammers who steal their funds.
5. Rug Pulls and Pump-and-Dump Schemes: In rug pull scams, developers of a new cryptocurrency or token vanish after collecting funds from early investors. In a pump-and-dump scheme, fraudsters artificially inflate the price of a cryptocurrency, encouraging others to buy in. Once the price peaks, the scammers sell off their assets, leaving new investors with worthless tokens as the price crashes.

How to Avoid Becoming a Victim of Crypto Scams

As cryptocurrency continues to attract more investors, it’s critical to be vigilant. The FBI has provided key advice to protect individuals from becoming victims:

1. Research Thoroughly: Before investing in any cryptocurrency or platform, conduct thorough research. Legitimate companies should be transparent about their leadership team, history, and security measures. Verify that platforms are regulated by financial authorities, and look for reviews or warnings online.
2. Be Wary of Unsolicited Offers: Scammers often target victims through unsolicited emails, messages, or social media posts. Be cautious of any investment opportunities that seem too good to be true, especially those that promise guaranteed returns or quick profits. High returns with little risk are often red flags.
3. Check Website URLs and Domains: Phishing sites are designed to look like legitimate platforms but often have slight variations in the URL. Always double-check the URL and ensure you are accessing the official website of any cryptocurrency service.
4. Avoid Publicizing Your Crypto Holdings: Sharing information about your cryptocurrency investments on social media can make you a target for scammers. Keep your investment details private and secure, especially when dealing with large sums of digital assets.
5. Use Multi-Factor Authentication (MFA): For any cryptocurrency exchange or wallet, activate multi-factor authentication (MFA). This extra layer of security can help prevent hackers from accessing your accounts, even if they obtain your password.
6. Be Skeptical of Unrealistic Returns: No legitimate investment can guarantee substantial returns in a short period of time. Be especially cautious if an investment platform is promoting “once-in-a-lifetime” opportunities or advertising success stories that sound exaggerated.

The Path Forward

Cryptocurrency is here to stay, and while it offers exciting opportunities, it also presents new challenges for law enforcement and investors alike. The FBI is urging the public to be cautious and stay informed. As more Americans turn to digital assets, it’s crucial to recognize the risks and remain alert to the tactics used by scammers. By understanding how these fraudulent schemes operate, investors can protect themselves and help prevent future losses in this rapidly evolving financial space.

As the FBI continues to crack down on these scams, experts emphasize that the best defense is education and awareness.