Since the beginning of 2021, over 46,000 people have lost money due to cryptocurrency fraud, making it the leading source of payment scams. Bitcoin accounted for 70% of crypto-related scams, with tether accounting for 10% and Ethereum accounting for 9%.
The report comes at a time when there are increasing reports of crypto fraud and the collapse of the crypto market due to regulated offerings.
According to the report, "nearly half of people who reported losing crypto to a scam since 2021 said it started with an ad, post, or message on a social media platform."
In addition, nearly four out of every ten dollars stolen came from social media. Meta-owned Instagram, Facebook, and WhatsApp led the way, accounting for 32%, 26%, and 9% of all fraud in the report, respectively. Telegram received 7% of the vote.
Fake investments were by far the most common type of social media fraud, with $575 million reported to the FTC during the time period. This type of scam allegedly begins with a promise of massive returns for investors and preys on people's lack of understanding of cryptocurrency.
With $185 million reported in losses since 2021, romance scams came in second to investment fraud. According to the FBI, romance scams occur when a criminal creates a false online identity in order to gain the affection and trust of a victim, then proceeds to manipulate and steal from the victim. According to a Chainalysis report, crypto scams reached an all-time high of $14 billion last year, but that represents only 0.15 percent of total crypto transactions.
Unlike traditional banks, there is no formal way to report suspicious activity, and transactions can only be reversed with a private key that is difficult to obtain. This, combined with people's lack of understanding of cryptocurrency, results in many people being scammed on a daily basis. The increasing prevalence of fraud has rekindled interest in tighter regulation.