FBI Reports Financial Losses From Crypto Scams Increased By 45% Last Year

As if handling your money wasn't difficult enough already (between inflation, interest rates, and housing prices), new scams have been reported throughout the country. Even worse, these scams are carrying higher price tags for their victims while happening more frequently. In 2023 alone, the FBI reported receiving more than 69,000 complaints to its Internet Crime Complaint Center (IC3 for short) regarding cryptocurrency, bitcoin, ether, and tether fraud (see our guide on the difference between bitcoin and ether).

All together Americans lost an astonishing $5.6 billion through cryptocurrency fraud schemes in 2023, a 45% jump in losses compared to 2022. The reason? As Michael Nordwall, assistant director of the FBI's criminal investigative division, wrote in the new report, "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."

All of this combines to create a recipe for exploitation and fraud, with American consumers the unwitting victims. While you should always do your research before investing in or sending money to anyone you might not know or you only recently met, there can also be a lot to understand about cryptocurrency itself and the ways in which it's exploited by criminals. Let's dive into some of the concerns with crypto and who's the most affected by the recent increase in crypto crime.

As Michael Nordwall explained in the FBI's report, of the major reasons scam losses have increased specifically for cryptocurrency has to do with the way the currency is used. One of the main things to understand about crypto is that it's a decentralized currency, which is often touted as a way to secure its transfer value.

Essentially, a third party isn't required in order to transfer cryptocurrency from one user to another, since the currency is seen as digital currency with a peer-to-peer method of use. While this can allow for easier transfers and trades, it also makes it easier to exploit. The lack of a financial intermediary (like a bank) for transactions means that there's also a lack of screening and/or validation on those transactions. This lack of oversight makes crypto a go-to method for would-be thieves and money launderers.

Another important element of the lack of oversight over crypto exchanges and transactions is that there isn't currently an established legal framework for transactions. This means there are virtually no protections, and no way to get your money back, should you be the victim of a scam involving crypto. While there are definitely specific crypto scams you should look out for, the changing nature of the currency makes it easier for consumers to become scam victims. Even worse, there's currently no obvious way for regulators to take action against suspicious trades or transactions, which can allow scams to continue long term without a way to shut them down.

Unfortunately, when the IC3 compared reported crypto scams across over 200 countries, the U.S. was at the very top for the sheer number of complaints, and by a lot. According to the FBI's report, cryptocurrency scam losses affected every single age group in 2023. While those over 60 years old were the most likely to have more reported cases of crypto fraud, they were also more likely to have lost higher amounts of money as a result. In 2023, those aged over 60 reported 16,806 complaints, with total losses of almost $1.65 billion. Those aged 50-59 made up the next highest-affected age group, with 8,918 complaints reported and $901 million in losses.

It's also worth mentioning that the majority of last year's cryptocurrency scams were investment crimes, with the next highest scam type stemming from technical support and personal data breach crimes. Similarly, investment crimes also had the highest total losses, with a whopping $3.96 billion in 2023. Other high-loss crimes included data breaches, government impersonation, and romance scams (see our guide on money scams to look out for in 2024). The top four states, meanwhile, with the highest reported crypto scam cases were perfectly in line with the states that have the highest populations in the country (California, Florida, Texas, New York) and these states also reported the highest overall crypto scam losses. However, surprisingly, Washington state took the fifth spot for highest reported complaints, but New Jersey took the fifth spot for highest reported scam losses.