Spotting the FTC’s most reported crypto scams

You may get tempted to jump on the cryptocurrency bandwagon when considering investment opportunities. After all, crypto tends to come up regularly in conversation, even among those who have never invested in cryptocurrency. But you may not realize that scammers capitalize on the popularity of cryptocurrency investing by increasing their efforts to glean information and money from unsuspecting victims. The Federal Trade Commission (FTC) continues to track cryptocurrency scam activity to protect consumers from falling into scammers' traps. Learn the strategies for spotting the FTC's most reported crypto scams.

The appeal of crypto investments

Cryptocurrency is everywhere, from sports arenas to ATMs and anywhere in between. It's not a mainstream payment method yet, although some online sellers will accept it for certain purchases. 

The overall buzz around cryptocurrency and investing in this payment method has significantly contributed to the hype and has led many people down this investment path. Scammers capitalize on this potential and deceive unsuspecting investors. Between January 2021 and June 2022, over 46,000 people reported losing money to crypto-related scams. Even more shocking is that those individuals collectively lost over $1 billion. 

Some of the features of cryptocurrency make it more appealing to aspiring investors. Some believe digital assets will replace traditional payment methods and alter the financial industry forever, and they want to get a piece of that pie. But most don't believe such a change is coming, focusing more on the opportunity to earn money. Bitcoin is one of the most prominent digital currencies, but its supply is finite. The idea that you might miss out if you don't invest in it pushes people to be part of the investment scene.

Many celebrities push crypto-related content through their social media platforms, which can further increase the appeal among their fans. According to the FTC report, nearly half of the victims of crypto scams started looking into the investment opportunity after seeing a post, ad or message through their social media feeds. Those between 20 and 49 are more than three times more likely to fall victim to a crypto scam. People in their 30s get hit the hardest.

How scams happen

You might think you're immune to a scam, particularly if you've grown up in the digital age. But the numbers show otherwise, as millennials and members of Generation Z are experiencing the effects of crypto scams. Once you get into crypto investing, getting your money back is nearly impossible, as you can't reverse transfers. Unlike other investments, no centralized authority figure monitors or regulates the transfer of cryptocurrency. You won't stay protected from fraud or suspicious transactions, which solely puts the responsibility of filtering through requests on your shoulders.

Common crypto scams

Explore some of these commonly reported scams to watch out for red flags.

Guaranteed profits or high returns

One of the biggest cryptocurrency scams is the promise of high returns or profits. No investment ever comes with a guarantee that you'll make money, so anyone who is telling you otherwise is misleading you. Before investing any money, you must analyze and assess your risk tolerance level. Cryptocurrency is highly volatile, making it one of the highest-risk investments. Only scammers promise easy or fast money, so stay far away from anyone making these claims.

Impersonation of government or company officials 

Another way scammers get money from unsuspecting individuals is by impersonating companies or government officials. They might use pop-ups or messages to claim that a security breach has occurred with your bank account or that you're behind on taxes. Getting a message like this one can be disarming, especially if it looks official. Scammers are often very good at creating messages that look similar, if not identical, to the communication sent by governmental agencies and well-known companies. 

In this type of scam, the person sending the message will claim that you must transfer all your assets into cryptocurrency or send crypto to protect yourself. But it's essential to avoid letting your fear overwhelm you in a moment of panic and overtake your common sense. Cryptocurrency isn't currently regulated or used by any governmental agency. It's not a payment method that most vendors accept in the United States, nor is it used to pay taxes or other government-related fees.

A valid government or bank official will never ask you to transfer your money into cryptocurrency as a protective measure. It's a scam, and the best way to protect yourself is by hanging up the phone, closing the message or deleting the pop-up as soon as it comes through. If you're concerned about the security of your financial information, contact your bank directly by phone or through the bank's official website. 

Online dating scams

Online dating apps are frequented by all generations, although those between 18 and 49 use them the most. According to a new Pew Research Center study, 48% of adults between 18 and 29 have used a dating app or site. Additionally, 38% of people 30 to 49 have done the same. The numbers drop among older adults.

The rise in popularity has made dating app users prime targets for various financial scams. Some people impersonate others, manipulating those they interact with to send money or purchase goods for them. Dating apps aren't immune to other scammers, including those claiming to be interested in cryptocurrency investments. Romance-related crypto scams are the second-most common type of scam reported by the FTC, with over $185 million in reported losses. This figure translates to a median individual loss of $10,000. 

Scammers present themselves as wealthy and sophisticated individuals, dazzling those they interact with based on their supposed lifestyle. When their targets inquire about how they acquired their wealth, these scammers often claim that crypto investments changed their lives and helped them get rich. Before long, they'll start offering  investment tips, especially around crypto investing. When their supposed romantic partner takes them up on the advice and tries to get involved in investing in crypto as well, the scammers take the money and run. 

Getting scammed is never a fun experience, but in some cases, it can alter people's financial situations for the long term. Knowing how scammers operate and where they target their victims is crucial. Since people on dating apps tend to be more vulnerable and open to those they interact with, a scammer can prey on this aspect and manipulate users into giving them money. Before making any investment, research it thoroughly and fully understand what you're getting into as a way to protect yourself and your hard-earned cash.

Spotting the FTC's most reported crypto scams requires staying vigilant and reading up on the latest scams from trusted sources.

Explore some of our other articles about protecting yourself from fraud:

• What victims of fraud should do first
• How to protect yourself from financial phone scams
• How to spot a job scam