Crypto and Investment Scams Are Skyrocketing This Year
2020 was a record year for investment and cryptocurrency scams — with 26,500 cases reported to the government, resulting in a loss of $419 million — and 2021 is on pace to exceed those numbers, according to a new survey.
The new Motley Fool survey finds that 2021 will be a record year for investment fraud as 14,079 investment scams were reported to the Federal Trade Commission in the first quarter of 2021 and those victims lost $215 million. This represents about half of the total reported scams and losses in all of 2020, which suggests 2021 will be a record-setting year for investment scammers.
“2021 is on track to be even more costly, with cryptocurrency scams playing a leading role,” Jack Caporal, research analyst at The Motley Fool, tells GOBankingRates.
“Younger Americans appear to be either targeted by crypto scammers or are more susceptible to crypto scams. Scammers are tapping into cryptocurrency’s growing popularity and the ubiquity of social media to take advantage of the general public,” he adds.
The survey did find that the use of cryptocurrency and social media by scammers has skyrocketed, but many people don’t report when they’re targeted by a scam, plus almost 75% of people targeted by fraud or a scam are less likely to invest in the future. People aged 20-49 are most likely to report losses from crypto investment scams and almost 74% of those targeted by such a scam said they’re less likely to buy crypto in the future, the survey finds.
In 2020, cryptocurrency became the most common payment method used in investment scams and fraud, While previously, wire transfer topped the list, cryptos became prevalent in 2020, partly because of its increasing popularity, which made it a prime target for scams. Since October 2020, Americans have lost more than $80 million to crypto fraud.
In a May report, the FTC said that while investment scams top the list as the most lucrative way to obtain cryptocurrency, scammers will use whatever story works to get people to send crypto.
“That often involves impersonating a government authority or a well-known business. For example, many people have told the FTC they loaded cash into Bitcoin ATM machines to pay imposters claiming to be from the Social Security Administration. Others reported losing money to scammers posing as Coinbase, a well-known cryptocurrency exchange. In fact, 14% of reported losses to imposters of all types are now in cryptocurrency,” according to the report.
Motley Fool’s Caporal says that one explanation for the scam surge is that recent fluctuations in the values of meme stocks and certain cryptocurrencies may be generating a sense of “fear of missing out” among investors who want to make big gains quickly on the next big stock or cryptocurrency.
“As a result, investors may be more willing to pursue opportunities that sound too good to be true, particularly in the cryptocurrency space, which scammers are increasingly operating in,” he says.
Social media is also playing an increasing role in investment scams, as scammers have used social media and messaging apps, sometimes posing as celebrities, to reach out to investors and promise them high returns for a huge upfront payment and subsequent fees, according to the Motley Fool.
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The Motley Fool outlines signs of an investment scam to watch out for: Being unable to determine an alleged broker’s physical location, being asked to deposit money (especially cryptocurrency), upfront communicating solely through social media or a messaging app and being promised returns that are too good to be true.
In addition, the FTC has several recommendations, including:
- Research before you invest. Search online for the company and cryptocurrency name, plus “review,” “scam,” or “complaint.”
- Be wary of guarantees and big promises. Scammers often promise you’ll make money quickly, or that you’ll get big payouts or guaranteed returns. They might offer you free money paid in cash or cryptocurrency — but, even if there’s a celebrity endorsement, don’t buy it. You’ll make money if you’re lucky enough to sell your crypto for more than you paid. Don’t trust people who say they know a better way.
- Anyone who says you have to pay by cryptocurrency, wire transfer or gift card is a scammer. If you pay, there’s usually no way to get your money back.
- You can report cryptocurrency scams, go to: reportfraud.ftc.gov.
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