Report on Cryptocurrency Fraud by the FBI
The FBI’s report offers a detailed analysis of the current landscape of cybercrime, highlighting the complications that arise from utilizing cryptocurrency in fraudulent schemes. According to the report, there has been a marked surge in investment scams related to cryptocurrency. It notes that financial losses attributed to fraud escalated from $2.57 billion in 2022 to $3.94 billion in 2023, marking a 53% increase.
Cryptocurrency investment scams increased from $2.57 billion in 2022 to $3.94 billion in 2023. These fraudulent schemes lure individuals with the promise of high returns on investments.
Rising Complexity in Scams
Cryptocurrency scams deceive individuals by offering significantly higher returns on digital currency investments. According to the report, these scams have grown more complex, with fraudsters exploiting the rapid expansion of the cryptocurrency market to attract and defraud victims, leading to considerable financial losses. The data further indicates that these scams affect individuals of all ages, primarily targeting those between 30 and 60 years old.
The report recommends adopting security measures such as two-factor and multi-factor authentication to safeguard against these scams. It also emphasizes the necessity of verifying payment and purchase requests to minimize the risk of scam incidents.
One prevalent scam affecting cryptocurrency users is the Romance Scam, where fraudsters create a false online persona to earn the trust and affection of their victim, convincing them to send cryptocurrency before ultimately vanishing. Chainalysis reports that Romance scams caused cryptocurrency users to lose more than $370 million in 2023.
Increased Involvement of Cryptocurrency in Fraudulent Activities
The report also uncovered an increasing tendency for hackers to utilize cryptocurrency to swiftly move and distribute funds acquired through Business Email Compromise (BEC) schemes. These scams entail the manipulation of email accounts to facilitate unauthorized transactions.
The data indicates that fraudsters are progressively turning to custodial accounts at financial institutions, cryptocurrency exchanges, or third-party payment processors. They either use these accounts directly or convince targeted individuals to transfer funds to these platforms, where the money is rapidly distributed.
In 2023, ransomware incidents rose by 18%, with reported financial damages surging by 74% to reach an astonishing $59 billion. The findings of the report serve as a vivid warning of the danger cybercriminals represent, especially to essential infrastructure sectors.
Is There a Decline in Cryptocurrency-Related Scams?
Following the agency’s alert on a surge in digital asset investment fraud, the FBI report was released. In 2023, it highlighted that criminals were more frequently employing social media and dating platforms to target victims. Nevertheless, Chainalysis contends that the amount of money stolen through cryptocurrency scams has decreased in recent years.
Our on-chain data indicates a global decrease in scamming revenue since 2021, consistent with the ongoing observation that scam activities thrive during periods of market highs, increased excitement, and when individuals fear missing out on quick wealth opportunities.
Nonetheless, Chainalysis admitted that not every crime gets reported, especially Romance Scams, which often remain undetected. Despite this, the company maintained its assertion that cryptocurrency-related fraud is decreasing.
Although there’s been an uptick in reporting — particularly in the US — which is positive, we still think that the understanding of romance scams, in particular, is hindered by underreporting. We suspect that the actual impact of scamming exceeds what is reflected in FBI reports and our on-chain data. However, considering the wider market trends, scamming activities are on a downward trajectory.
