More than 10% of financial fraud cases are crypto-related, FBI report says

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The Federal Bureau of Investigation’s Internet Crime Complaint Center has released its 2023 Cryptocurrency Fraud Report, revealing a significant increase in losses due to cryptocurrency scams. Despite accounting for only 10% of all complaints received, crypto fraud accounted for nearly half of all financial losses reported to the FBI last year.

Of the 69,000 cryptocurrency complaints filed in 2023, people over the age of 60 were the most commonly targeted demographic, suffering losses of nearly $1.6 billion. Investment schemes dominated the fraud landscape, accounting for 71% of reported cases, while call center fraud and government impersonation scams accounted for around 10% of incidents.

Play to win scams and crypto ATMs

The FBI has received complaints from more than 200 countries, but the vast majority originate from the United States. Many losses have resulted from trust schemes, prompting the FBI to warn against trust investment advice from people you’ve never met in person. The report also highlighted the risk of labor trafficking, where workers are lured into exploitative positions overseas, often in call centers running “pig butcher” scams.

Other fraudulent activities threatening US citizens have included play-to-win scams and companies falsely claiming to recover lost crypto assets. Crypto ATMs (kiosks) emerged as a significant vulnerability, with 5,500 cases resulting in over $189 million in losses. Fraudsters prefer these machines because of the anonymity of transactions, using them for various schemes, including customer service fraud, extortion and romance scams.

James Barnacle, deputy assistant director of the FBI’s criminal investigation division, said the chances of recovering funds lost through crypto kiosks are “slim.” He also revealed that when they notified victims of the fraud, 75% did not know they had (already) been targeted.

Security and regulation

The report highlights the increasing sophistication of cryptocurrency fraud and the need for increased public awareness. As digital assets become more popular, scammers are adapting their tactics to exploit vulnerabilities in the ecosystem and rip off unsuspecting investors.

For the crypto industry, these findings highlight the urgent need for improved security measures, improved user education, and stronger collaboration with law enforcement agencies. The substantial increase in fraud cases may also cause regulators to scrutinize the sector more closely, which may lead to stricter oversight and compliance requirements for the crypto firm. In related news, a new method called “ZERO-KYC mechanism” has been proposed by a pseudonymous developer with the aim of countering P2P crypto scams.

The FBI advises investors and users of digital assets to remain vigilant, conduct thorough research before engaging in any crypto-related activities, and remain wary of unsolicited investment opportunities or requests for personal information.

Recent crypto fraud cases include the arrest of a ZKasino founder after a group of investors worked together to go after the co-founders as well as former executives of Cred, a credit and investment firm Cred, who received charges from DOJ. In July, a Chinese businessman linked to Steve Bannon was found guilty of a billion dollar crypto scam.

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