$5.6B lost to cryptocurrency fraud schemes last year: FBI

Americans lost more than $5.6 billion in 2023 from fraud schemes involving cryptocurrency, according to the FBI.

The agency, in a report published Monday, said the bureau received more than 69,000 complaints last year from victims of financial fraud involving cryptocurrencies — such as bitcoin, ethereum and tether — equal to roughly $5.6 billion in losses. This marked a 45 percent increase in losses since 2022, the report said.

Most of these losses came from investment fraud, which accounted for $3.9 billion of the total loss, per the FBI. Personal data breaches ($494.4 million in losses) and tech support scams (nearly $421 million) also accounted for significant losses.

Michael Nordwall, assistant director of the FBI’s criminal investigative division, noted that while only 10 percent of last year’s fraud complaints were related to crypto, financial cuts from these complaints made up nearly half of the total cash lost in 2023.

“The decentralized nature of cryptocurrency, the speed of irreversible transactions, and the ability to transfer value around the world make cryptocurrency an attractive vehicle for criminals, while creating challenges to recover stolen funds,” Nordwall wrote.

The FBI found criminals most often established trust and confidence with the victim before convincing them to use fraudulent websites or applications to invest in cryptocurrency. To do this, they contact victims through things like dating apps, social media platforms, professional networking sites or encrypted messaging apps, the report notes.

Once victims are convinced to go onto the fraudulent websites or apps, the criminals coach them into the investment process and show fake profits, the FBI said.

Sometimes victims will be able to bring in small earnings, but when they try to fully withdraw those investments, they are told they need to pay a fee or taxes. Even if they do so, the criminals do not release the funds, the agency added.

In some cases, victims who report losing money may also be targeted by fake businesses claiming to help recover lost cryptocurrency funds. These fraudulent businesses charge an up-front fee and either stop contact after an initial deputy or request further funds, the report explained.

The states with the highest number of complaints were California (9,522), Florida (5,076), Texas (4,770), New York (3,202) and Washington (2,049). States with the lowest number were South Dakota (117), North Dakota (103), Wyoming (96) and Vermont (69).

To avoid these scams, the FBI recommended people research and verify unknown callers, websites or social media before interacting with them. People should not give personal information without verifying the requestor’s identity, the bureau added.

Fraud linked to cryptocurrency came into the spotlight in 2022 after the collapse of crypto exchange firm FTX and the subsequent trial of its founder, Sam Bankman-Fried. He was convicted on seven counts of fraud and conspiracy, and later sentenced to 25 years in prison.