The latest report from the Federal Bureau of Investigation’s Internet Crime Complaint Center (IC3) reveals a concerning trend in cryptocurrency-related fraud, which has surged to an estimated $5.6 billion in financial losses.
In this report, the FBI highlighted that the IC3 received more than 69,000 complaints pertaining to financial crimes connected to various cryptocurrencies, including Bitcoin, Ethereum, and Tether. Although these cryptocurrency-centric complaints comprised only 10% of the overall financial fraud reports, they represented nearly half of the total financial damages incurred.
Significantly, the agency noted a dramatic 53% rise in losses associated with cryptocurrency investment fraud schemes, with total damages escalating from $2.57 billion in 2022 to $3.96 billion in 2023.
Financial Distress Predominantly Affects Older Individuals
Victims of these fraudulent schemes are often left in dire financial situations, with some accumulating considerable debt in a desperate attempt to recoup their losses. The report identified a trend where individuals aged 30 to 49 lodged the most complaints regarding cryptocurrency investment fraud, with around 5,200 reports documented in both the 30-39 and 40-49 age demographics.
However, it was notably individuals over 60 years old who experienced the most substantial financial setbacks, collectively reporting losses exceeding $1.24 billion.
The misuse of cryptocurrency extends across nearly all categories of fraud monitored by the IC3. Investment scams were the most prevalent, accounting for approximately 71% of total losses associated with cryptocurrency-related fraud, while call center scams—including tech support and government impersonation schemes—made up about 10% of these financial losses.
The combination of cryptocurrency’s decentralized nature, along with the speed and irreversibility of transactions, and the ability to transfer funds globally, has rendered it an attractive target for criminals.
Rise of Liquidity Mining and Fake Gaming Scams
Among the latest fraudulent activities, “liquidity mining scams” have become increasingly common. In legitimate contexts, liquidity mining allows investors to stake their cryptocurrencies in a pool to facilitate transactions, earning a share of associated trading fees. However, fraudsters have exploited this concept, specifically targeting holders of popular cryptocurrencies such as Tether and Ethereum.
Scammers often develop a relationship with their victims over days or weeks, eventually persuading them to connect their wallets to a fraudulent liquidity mining operation by enticing them with promises of daily returns ranging from 1% to 3%. Once victims link their wallets, the criminals swiftly siphon off their funds without the victims' knowledge.
Another alarming trend involves "fraudulent play-to-earn gaming applications." Criminals attract unsuspecting targets with advertisements for games that purportedly offer cryptocurrency rewards. Initially, fraudsters establish online connections with victims, subsequently introducing them to a game where they can earn cryptocurrency by participating in various in-game tasks, like cultivating crops on a virtual farm.
Players are prompted to create a cryptocurrency wallet and fund it in order to engage in the game. While players see their in-game rewards grow, they are often encouraged to invest even more money. However, as soon as they stop adding funds, scammers utilize malicious software embedded in the game to abscond with their cryptocurrency. Victims are frequently misled into believing they can retrieve their lost funds by paying fictitious taxes or fees, ultimately leading them to never regain access to their money.
The FBI’s report serves as a vital reminder of the growing threats posed by cryptocurrency fraud and underscores the importance of vigilance in the digital financial landscape.
