Losses from crypto fraud rose 45% to $5.6 bn in 2023, Indians lose $44 mn

6 min read Last Updated : Sep 10 2024 | 10:58 AM IST

The FBI has reported a significant increase in cryptocurrency-related fraud in the United States. Losses from these scams surged by 45% in 2023, reaching over $5.6 billion.

Following a crypto market downturn in 2022, token prices began to rally last year, triggering renewed interest from criminals. Bitcoin more than doubled last year, and has risen about 35% in 2024.

“Criminal actors exploit cryptocurrencies for all schemes, to include tech support, confidence and romance, investment, and government impersonation scams. Investment fraud was the most reported cryptocurrency scheme in 2023 and also saw the most reported losses, with about $3.9 billion lost,” said the FBI in a report.

According to the FBI’s report, India ranked fifth globally in terms of the number of cryptocurrency-related complaints, with 840 cases reported.However, India’s losses amounted to $44,054,244, placing it in the top ten countries in terms of total financial impact.

The United States received the most complaints, followed by Canada and the United Kingdom.
The total losses attributed to cryptocurrency-related scams exceeded $4.8 billion globally, with the United States accounting for the majority.
Scammers employ various tactics, including investment scams, phishing, and government impersonation.

Increased Complaints: The number of cryptocurrency-related complaints received by the FBI’s Internet Crime Complaint Center rose to nearly 69,500 last year.
Significant Losses: Despite representing only 10% of financial fraud complaints, cryptocurrency-related losses accounted for almost 50% of the total losses.
Market Rally: The resurgence of cryptocurrency prices in 2023 coincided with a renewed interest from scammers.
Investment Scams: The majority of cryptocurrency-related losses were attributed to investment scams.
Call Center Frauds: Government impersonation scams using cryptocurrency accounted for a significant portion of the losses.

“As the use of cryptocurrency in the global financial system continues to grow, so too does its use by criminal actors,” Michael Nordwall, assistant director of the FBI Criminal Investigative Division, wrote in the report.

2023 CRIME TYPES WITH CRYPTOCURRENCY NEXUS

Use of cryptocurrency by criminals was most pervasive in investment scams, where losses accounted for almost 71% of the total, according to the report. Call center frauds, such as government impersonation scams, accounted for about 10% of cryptocurrency losses.

“Scams targeting investors who use cryptocurrency are skyrocketing in severity and complexity,” said FBI Director Christopher Wray. “The best way to help stop these crimes is for people to report them to ic3.gov, even if they did not suffer a financial loss. The information allows us to stay on top of emerging schemes and criminals’ use of the latest technologies, so we can keep the American public informed and go after those who commit these crimes.”

In 2022, the FBI formed the Virtual Assets Unit (VAU), a specialized team dedicated to investigating cryptocurrency-related crimes. The VAU centralizes the FBI’s cryptocurrency expertise, providing technological equipment, blockchain analysis, virtual asset seizure training, and other sophisticated training for FBI personnel.

The FBI warns that as cryptocurrency usage continues to grow, so too will the risk of associated scams. Individuals should be cautious and vigilant when dealing with cryptocurrency-related investments and offers.

Investment Fraud

Investment fraud generally involves a deceptive practice to induce investment based on false information. These schemes offer individuals large returns with the promise of minimal risk. Over the years, cryptocurrency’s widespread promotion as an investment vehicle, combined with a mindset associated with the “fear of missing out,” has led to opportunities for criminals to target consumers and retail investors—particularly those who seek to profit from investing but are unfamiliar with the technology and the attendant risks.

Losses from cryptocurrency-related investment fraud schemes reported rose from $2.57 billion in 2022 to $3.96 billion in 2023, an increase of 53%. Many individuals have accumulated massive debt to cover losses from these fraudulent investments. While individuals in the age ranges of 30 – 39 and 40 – 49 filed the most cryptocurrency-investment fraud complaints (approximately 5,200 reports in each age group), complainants over the age of 60 reported the highest losses (over $1.24 billion).

Why do criminals exploit cryptocurrency?

Decentralized Nature: Cryptocurrency is decentralized and distributed, which can offer a secure method to transfer value. Today’s market includes thousands of cryptocurrencies users can transfer

around the globe in exchange for goods, services, and other cryptocurrencies. Since cryptocurrencies eliminate the need for financial intermediaries to validate and facilitate transactions, criminals can exploit these characteristics to support illicit activity such as thefts, fraud, and money laundering.

Irrevocable Transactions that Move Quickly: A cryptocurrency transfer can occur anywhere. The only requirements for transmitting funds from a particular address is the associated private key (which functions like a password or a PIN) and an Internet connection. Third parties do not sit between, or authorize, transactions and transactions are irrevocable – meaning they cannot be reversed. Criminal actors connected to the Internet from anywhere in the world can also exploit these characteristics to facilitate large-scale, nearly instantaneous cross-border transactions without traditional financial intermediaries that employ anti-money laundering programs.

Challenges to Following Funds: Cryptocurrency transactions are permanently recorded on publicly available distributed ledgers called blockchains. As a result, law enforcement can trace cryptocurrency transactions to follow money in ways not possible with other financial systems.

Below are some tips to protect yourself from cryptocurrency schemes:

Criminals will seek to instill a sense of urgency and isolation.
When receiving an unsolicited call by an unknown caller claiming to work for a well-known company or government agency, hang up and independently research the company or agency’s publicly published phone number and call it to confirm authenticity of the original call.
No legitimate law enforcement or government official will call to demand payment via a cryptocurrency kiosk.
Never give personally identifying information to anyone without verifying the person is who they say they are.
Verify the validity of any investment opportunity strangers or long-lost contacts offer on social media websites. If you have never met an individual in real life, even if you have spoken on the phone or video chatted, be very cautious of accepting investment advice or opportunities.
Be on the lookout for domain or website names that impersonate legitimate financial institutions, especially cryptocurrency exchanges.
Fraudulent businesses often use website addresses that mimic real financial institutions, but are often slightly different, to convince people the fraudulent website is legitimate.
Do not download or use suspicious-looking apps as a tool for investing unless you can verify the legitimacy of the app.
If an investment opportunity sounds too good to be true, it likely is. Be cautious of get-rich-quick schemes.
Investment involves risk. Individuals should invest based on their financial objectives and financial resources and, if in any doubt, should seek advice from a licensed financial adviser.

First Published: Sep 10 2024 | 10:56 AM IST

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