Approximately a quarter of the $10.3 billion lost by Americans to online scams in 2022 was attributed to losses in crypto investments.
183% Surge in Crypto Fraud in 2022
According to a report by the FBI, there was a 183% surge in online scams related to crypto investments, rising from $907 million in 2021 to $2.57 billion in 2022. The report also revealed that online scammers accumulated $10.3 billion in 2022, a substantial increase from $6.9 billion in 2021, based on data collected by the Internet Crime Complaint Center (IC3), a law enforcement and national security agency. The FBI observed that scammers took advantage of the cryptocurrency industry's nascent state and the participation of inexperienced users. The report stated that the majority of victims reporting crypto scams were between 30 and 49 years old.
Methods Used by Scammers to Steal Billions
Among the top five investment scams identified by the FBI in 2022 was liquidity mining. This scam involves victims linking their cryptocurrency wallet to a fraudulent liquidity mining service, allowing scammers to wipe out their assets. Additionally, scammers hacked into victims' social media accounts and used their profiles to perpetrate false investment schemes on their friends, leveraging their trust.
The FBI also noted instances where scammers contacted real estate agents, offering to purchase high-end properties using cryptocurrency. The scammer convinced the agent that they owned multimillion-dollar properties, which led the agent to join the scam.
Fraudsters also impersonated celebrities and built fake relationships with victims, using these connections to promote phony investment opportunities. In some cases, they created fictitious employment opportunities at investment firms to lure unsuspecting applicants. Instead of being offered a job, hopeful applicants received investment advice, with the goal of eventually stealing from them.
The Dark Side of Crypto: Fraud, Collapse, and Losses in 2022-2023
The impact of crypto fraud and related activities in 2022 was staggering, costing investors nearly $3.5 billion, according to a report by Privacy Affairs titled "Cryptocurrency Scams of 2022." The report highlighted the detrimental effect of fraud on the market, given the series of collapsing exchanges, failing stablecoins, and crypto hacks. It could be considered the worst year in crypto.
The significant events of the crypto winter in 2022 included the November collapse of popular exchange FTX, which affected crypto prices and impacted several blockchain businesses. Earlier in the year, LUNA and UST, an algorithmic stablecoin, also crumbled.
In early 2023, crypto banks such as Silvergate Bank and Silicon Valley Bank (SVB) closed down and experienced a bank run, causing fear and panic in the market and leading to a surge in cryptocurrency prices.
Several blockchain companies also reported losing billions of dollars from security breaches and exploits. The most recent attack occurred on the lending protocol, Euler Finance, which was hacked for over $197 million.