FBI Alert: How Did Crypto Fraud Losses Surge To Reach $5.6B?

Crypto fraud surged 45% last year, with total losses reaching $5.6 billion, according to the US Federal Bureau of Investigations (FBI). The rise in cryptocurrency-related scams came as digital assets regained popularity after the 2022 market downturn. 

The FBI’s Internet Crime Complaint Center received nearly 69,500 complaints related to crypto fraud, with losses representing almost half of the total financial fraud losses in 2023.

Crypto Fraud Losses Surge 45% To $5.6B

According to a report by the FBI, cryptocurrency-related fraud incidents escalated significantly in 2023, marking a 45% increase from the previous year. Consumers reported losses exceeding $5.6 billion, underscoring the growing prevalence of scams in the digital asset space. 

In addition, the report shows that investment scams constituted the majority of crypto fraud cases. Nearly 71% of total losses reported to the Federal Bureau of Investigations were investment scams. These scams often lure victims with promises of high returns in the volatile cryptocurrency market. 

Other notable fraud categories included call center frauds, where criminals impersonate government officials to extort cryptocurrency from unsuspecting individuals.

The FBI’s report also highlighted a stark geographic distribution of crypto fraud complaints. California, Florida, and Texas led in terms of the highest number of reported cases. Elderly individuals were particularly vulnerable, comprising a significant portion of victims affected by cryptocurrency-related scams. 

Moreover, the report urged caution among investors, advising them to scrutinize opportunities and avoid schemes that promise unrealistic returns.

Recently, the Federal Bureau of Investigation issued a new advisory cautioning against the use of cryptocurrency money-transfer services that are not registered as Money Services Businesses (MSBs) with the Financial Crimes Enforcement Network (FinCEN) in the United States. 

Impact on Consumer Confidence and Regulatory Response

The sharp increase in crypto fraud cases has raised concerns about consumer confidence in digital assets and prompted regulatory scrutiny. Authorities are increasingly focused on cracking down on fraudulent activities within the crypto sector. 

Concurrently, just last week, the FBI warned crypto firms and Bitcoin ETF issuers about a possible attack by North Korean hackers. Despite the challenges posed by fraud, cryptocurrency continues to gain traction as a legitimate investment vehicle. 

However, the prevalence of scams has been a major concern. Just today, ConGape reported that the hacker involved in the WazirX hack moved 5000 ETH, worth over $11M, through Tornado Cash. This underscores the intensifying number of crypto frauds exploiting the growing popularity of cryptocurrencies.