Investing in cryptocurrency has made it to the mainstream — and unfortunately, crypto scams have probably invaded your social media feeds.
The FTC's data shows that money lost to fraud on social media networks is more likely to have been paid via cryptocurrency than any other payment method. Of the social media platforms identified in crypto fraud reports, Instagram was the most common. It accounted for 32% of fraud cases on social networks, according to the FTC. Facebook was next, appearing in 26% of social media fraud reports.
It’s no wonder that people between the ages of 20 and 49 were more than three times as likely to report losing money in a crypto scam compared to their older counterparts. Younger people are simultaneously more likely to believe (and invest) in crypto and to be active on social media.
The FTC says that scammers make posts, take out ads, or send direct messages via these platforms, most commonly touting fake investment opportunities. They promise big returns, but (of course) the profits never come.
Sometimes the fraudulent messages seem to come from celebrities or investment managers. Fraudsters also adopt fake personas in what the FTC calls “romance scams,” building trust via an online relationship with the victims and then convincing them to send money to invest in cryptocurrency or send them cryptocurrency directly.
Between January and March of 2022, more than 46,000 people reported being the victim of a crypto-based fraud scheme, according to the FTC, and the real number is likely much larger because the majority of crypto scams are not reported. The median reported loss was $2,600, and in total, nearly $330 million was reported lost to crypto fraud in those three months.
In 2021, losses to crypto scams were nearly 60 times what they were just three years earlier, the FTC said.
How to avoid crypto scams
Cryptocurrency investments are largely unregulated, and there are very few guardrails in place to protect consumers from grift. It doesn’t help that inexperienced investors tend to be unfamiliar with how cryptocurrency works. There’s no bank or investment firm involved that can identify fraudulent transactions, and there’s certainly no deposit insurance. Transfers can’t be reversed, either. “Once the money’s gone, there’s no getting it back,” the FTC’s report says.
Luckily, there are resources that can help you spot common crypto scams — and avoid them.
The FTC notes that only scammers will require you to pay for things in cryptocurrency, whether in advance of a purchase or to protect your money. Scammers also tend to promise big returns, quickly and without risk. That’s a huge red flag, the agency says.
Cryptocurrency is an extremely volatile investment, and nobody can guarantee profits.