The FBI’s annual Internet Crime Report highlighted a massive surge in investment scams in 2023, particularly those involving cryptocurrencies.
In 2023, the agency saw this specific form of scam increase “from $2.57 billion in 2022 to $3.94 billion in 2023, an increase of 53%.”
As detailed by the FBI and the BBB (Better Business Bureau) this month, these socially engineered scams frequently start with romance or confidence tricks, eventually guiding victims toward fraudulent cryptocurrency investments. The criminals — such as those involved in a $1.89 billion crypto scheme — tend to be based overseas, and exploit trust to encourage more substantial investments, only to leave victims empty-handed when they attempt to withdraw their funds.
Notably, the state-by-state analysis in the FBI’s report revealed California suffered the highest losses at $2.159 billion, followed by Texas at $1.021 billion, Florida at $874 million, New York at $749 million, and New Jersey at $441 million.
FBI Warning, Insights from the BBB and Scam Sniffer
The FBI’s annual report, released in March 2024, said investment scam losses soared to $4.57 billion in 2023, marking a 38% increase from 2022. The report also identified Business Email Compromise (BEC) scams, which often leverage cryptocurrency platforms for unauthorized fund transfers, as the “second-costliest type of crime,” in 2023.
Meanwhile, more organizations, including the BBB, Scam Sniffer, and Chainalysis, pitched in with their own key findings.
The BBB’s 2023 Scam Tracker report saw “cryptocurrency scams rising to the top of our list of riskiest scams, with a high percentage of people reporting a monetary loss (80.4%) and a high median dollar loss ($3,800).” This report also identified a significant 80.4% of people reporting monetary losses to investment/cryptocurrency scams, particularly males aged 45 and above.
Furthermore, the Web3 anti-scam solution company, Scam Sniffer, reported a staggering loss of approximately $46.86 million to cryptocurrency phishing scams in February, highlighting a particularly vulnerable sector: Ethereum (ETH) blockchain users.
Also, Chainalysis’s 2024 report shed light on the prevalence of “pig butchering” scams, where fraudsters “often communicate addresses to victims in one-to-one communication channels like text” — making it difficult for blockchain analysts to identify.
Protect Yourself from Investment Fraud
The rise in cryptocurrency-related scams requires netizens to approach investment offers with extreme caution.
The FBI recommends:
- Avoid sharing financial details or personal identification information (PII) with strangers who reach out to you.
- Refrain from making investments based on recommendations from individuals known only through online interactions like WhatsApp groups.
- Always verify the legitimacy of any investment opportunity, cryptocurrency website, or application before proceeding.
- If you suspect you’ve been caught in a scam after investing, resist the urge to pay extra fees or taxes to retrieve your investment.
- Steer clear of paying for services promising to recover funds lost to scams.
“More recently, the IC3 data suggests fraudsters are increasingly using custodial accounts held at financial institutions for cryptocurrency exchanges or third-party payment processors, or having targeted individuals send funds directly to these platforms where funds are quickly dispersed,” the FBI said.
The FBI recommended utilizing two-factor authentication (at a minimum) and verification procedures outside of email communication to combat these scams. Furthermore, victims should immediately report incidents to the IC3 and avoid engaging with services claiming to recover lost funds, which may be an extension of the scam. Critical transaction details, including cryptocurrency addresses and transaction IDs, are essential for pursuing any investigation.
Have a look at our 2024 cryptocurrency scams guide for key information on the latest digital asset-related scams and how to protect your assets.
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