As the popularity — and price — of bitcoin, dogecoin and ethereum continue to rise, so too do the online scams associated with those digital currencies.
Americans have lost more than $80 million in cryptocurrency investment scams since October, a 1,000% increase from the fall of 2019, according to Federal Trade Commission data. People between the ages of 20 and 39 were hit particularly hard, representing about 44% of the reported losses, the FTC said.
The FTC data, released Monday, showed about 7,000 reports of crypto investment scams received by the agency since last fall, with a median loss of $1,900. The losses are taking place as bitcoin prices surge, celebrities back dogecoin and more Americans try to understand what cryptocurrency is all about.
“All of this plays right into the hands of scammers,” Emma Fletcher, a program analyst with the FTC, said in an analysis of the data. “They blend into the scene with claims that can seem plausible because cryptocurrency is unknown territory for many people.”
Digital currencies have been at the center of many of the year’s biggest financial and business headlines. Although considered a highly unstable form of money by many experts, bitcoin reached a record high price of nearly $50,000 in February, in part because more companies are accepting it as a form of payment.
Starbucks, Visa and Whole Foods are just a few of the major retailers that accept bitcoin. Tesla CEO Elon Musk earlier this year announced his company was accepting bitcoin as payment for its electric cars, only to backtrack on his commitment last week.
Ethereum and dogecoin also hit record-high prices earlier this year, while celebrities including Snoop Dogg, Paris Hilton, Kanye West and others have thrown their names behind digital currencies of their liking. The number of ATMs across the country that offer access to cryptocurrency has also grown.
Still, dramatic swings in value have kept many traditional investors away from crypto investments. Dogecoin, for example, fell 36% earlier this month after Musk, while hosting “Saturday Night Live,” called the digital currency “a hustle.”
“Cryptocurrency is promising, but please invest with caution,” Musk later tweeted, adding in an attached video clip that “it should be considered speculation at this point.”
Scammers, according to the FTC, are finding creative ways to con people into fraudulent crypto investments. One type of scheme offers investment “tips” online that redirect consumers to fraudulent sites. In another, scammers pose as celebrities, such as Elon Musk, and trick consumers into sending them cryptocurrency by promising that the celebrity will contribute to their investment.
Fraudsters also sometimes pose as a government agency or business associated with cryptocurrencies, the FTC said.
“For example, many people have told the FTC they loaded cash into Bitcoin ATM machines to pay imposters claiming to be from the Social Security Administration,” Fletcher wrote. “Others reported losing money to scammers posing as Coinbase, a well-known cryptocurrency exchange.”
Consumers can spot a scam if a person or organization reaches out to them with a guarantee of huge investment returns if they send them cryptocurrency, the FTC said. Another red flag is if a person or group insists on being paid by cryptocurrency only, or claims they have a better way of growing one’s savings using crypto, the FTC said.
“To be clear, while investment scams top the list as the most lucrative way to obtain cryptocurrency, scammers will use whatever story works to get people to send crypto,” Fletcher wrote.
More information about cryptocurrency investment scams, and how to avoid them, can be found on the FTC’s website at ftc.gov/cryptocurrency.