Key points
- Crypto fraud in 2023 led to a 45% increase in losses compared to 2022.
- Victims over 60 years of age were the most affected, with losses close to 1.6 billion dollars.
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The Federal Bureau of Investigation's Internet Crime Complaint Center has published its Cryptocurrency Fraud Report 2023revealing a significant increase in losses due to cryptocurrency-related scams. Despite accounting for only 10% of total complaints received, cryptocurrency fraud accounted for nearly half of all financial losses reported to the FBI last year.
Of the 69,000 cryptocurrency-related complaints filed in 2023, people over 60 were the most targeted demographic, with losses of nearly $1.6 billion. Investment schemes dominated the fraud landscape, accounting for 71% of reported cases, while call center frauds and government impersonation scams accounted for roughly 10% of incidents.
Play-to-earn scams and cryptocurrency ATMs
The FBI received reports from more than 200 countries, but the vast majority originated in the United States. Many losses were the result of confidence schemes, prompting the FBI to warn against relying on investment advice from people you’ve never met in person. The report also highlighted the risk of labor trafficking, where workers are tricked into exploitative jobs overseas, often at call centers that run “pig slaughter” scams.
Other fraudulent activities threatening US citizens include play-to-win scams and companies falsely claiming to recover lost crypto assets. Cryptocurrency ATMs (kiosks) emerged as a major vulnerability, with 5,500 cases resulting in losses exceeding $189 million. Fraudsters prefer these machines due to the anonymity of transactions and use them for a variety of schemes, including customer service fraud, extortion, and romance scams.
James Barnacle, assistant deputy director of the FBI's criminal investigation division, said the chances of recovering funds lost through cryptocurrency kiosks are “slim.” He also revealed that when notifying fraud victims, 75% were unaware that they had (already) been victims of fraud.
Security and regulation
The report highlights the increasing sophistication of cryptocurrency-related fraud and the need for greater public awareness. As digital assets become more mainstream, fraudsters are adapting their tactics to exploit ecosystem vulnerabilities and take advantage of unsuspecting investors.
For the cryptocurrency industry, these findings highlight the urgent need to enhance security measures, improve user education, and strengthen collaboration with law enforcement. The substantial rise in fraud cases may also prompt regulators to scrutinize the sector more closely, potentially leading to stricter oversight and compliance requirements for cryptocurrency companies. In related news, a new method called “ZERO-KYC mechanism” has been proposed by a pseudonymous developer, with the aim of countering P2P cryptocurrency scams.
The FBI advises investors and digital asset users to remain vigilant, conduct thorough research before engaging in any cryptocurrency-related activity, and be wary of unsolicited investment opportunities or requests for personal information.
Recent cases involving crypto fraud include the ZKasino founder arrested after a group of investors worked together to prosecute the co-foundersas well as former executives of Cred, a lending and investment firm Cred, receiving Department of Justice chargesIn July, a Chinese businessman linked to Steve Bannon was found guilty of Running a billion dollar cryptocurrency scam.
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