As the bottom falls out of the crypto market, scams spread unabated.
Over the last few months, crypto markets have crumbled. Bitcoin has lost two-thirds of its value since last November, Ethereum's fallen by three quarters, and others have collapsed altogether.
You might think that their plummeting value would make cryptocurrencies less attractive to criminals. However, according to reports from both the UK and the US, the number of cryptocurrency scams is actually on the rise.
NordVPN says its data shows that there's been a 58% rise in the amount of money stolen year on year in the UK through crypto fraud, with the average victim typically losing £36,250. So far this year, scammers have already made off with £118 million.
Meanwhile in the US, the Federal Trade Commission (FTC) warned last month that consumers reported losing more than $1 billion to fraud involving cryptocurrencies between January 2021 and March 2022. Here, the median amount lost was $2,600.
"These frauds are thriving, despite the huge crash in Bitcoin and other currencies, and, worryingly, the clear rise in the amounts stolen per fraud shows the scammers are getting better at fleecing their victims," says Marijus Briedis, CTO and digital privacy expert at NordVPN.
Who's falling for these scams?
According to NordVPN, it's younger people who are the most likely to be targeted by bogus investment schemes, with those aged between 20 and 39 accounting for two in five incidents.
Attracted by the prospect of generous returns, victims are often lured in through social media posts featuring fake celebrity endorsements. In one notorious example, Facebook ads featuring finance expert Martin Lewis - without his permission - promised investors enormous returns.
Other celebrities whose names have been used in this way include Richard Branson and members of Dragon's Den, as well as Prince Harry and Meghan Markle.
Once a victim clicks on the link, they are contacted by the scammers and persuaded to install software that will allow them to open a cryptocurrency account. However, the package includes remote access software, allowing the fraudsters to pocket the cash.
In a variation of this scheme, romance scammers take to dating apps to woo potential victims and persuade them to send cryptocurrency; meanwhile, fraudsters also impersonate recruiters to offer jobs while asking for a 'training fee' to be paid in cryptocurrency. And scammers in the US often work to persuade victims that their money is at risk because of fraud or a government investigation and that the only way to protect their cash is by converting it to cryptocurrency.
In a simpler scheme, scammers pretend to be reputable investment managers, requesting an up-front fee, which they pocket.
Meanwhile, so-called rug-pull scams involve hyping up an investment, such as the Squid coin or non-fungible tokens (NFTs,) which have been set up in such a way that it's impossible to sell. The scammers are then able to disappear with the money.
Consumers are advised to avoid any investment that guarantees big profits, never to mix online dating and investment advice, and to avoid any deal that requires them to buy cryptocurrency.
"The intricacies of crypto scams can vary wildly, but ultimately the macro level convincer is always the same – the promise of something for free," comments Dan Holmes, fraud SME at fraud protection firm Feedzai.
"One final thing to consider is the fact that during economic downturn we tend to see an increase in customers falling for scams like this. Struggling consumers tend to become more emotionally and financially vulnerable, and the lure of making high returns from investments like crypto creates a heightened susceptibility to scams, which fraudsters prey on."
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