According to a report released by the Federal Bureau of Investigation (FBI) this week, Americans lost a staggering $5.6 billion to cryptocurrency scams in 2023. James Barnacle, deputy assistant director of the FBI’s criminal investigative division, explained that scammers invest considerable time in building relationships with potential victims.
“Over time, the victim is being cultivated, and the fraudsters are building confidence in the victim. They’re friends. They met on the internet, or they met on social media. They’ve met on text message,” Barnacle said in a recent interview. “Everyone reads about all these crypto millionaires, so people are looking for the next big investment opportunities, and fraudsters take advantage of that.”
Once trust is established, fraudsters present investment opportunities, often proposing participation in exclusive cryptocurrency groups. Victims are then directed to web applications where they are encouraged to invest.
The financial damage from these scams is severe. Many victims deplete their savings or take out substantial loans, including mortgages and equity lines of credit. “People withdraw or liquidate from their 401(k) or their IRA, and they’ll put money into these investment schemes, keep putting in more and more and more,” Barnacle said. Consequently, losses can range from thousands to millions of dollars.
Elderly people are the most affected, with those over 60 losing nearly $1.6 billion in 2023. Barnacle said older victims have more free time and are thus easier targets. Fraudsters are adept at providing step-by-step instructions for victims to transfer money through cryptocurrency kiosks, a tactic that even the elderly fall for frequently.
“The chances that someone recovers the money are slim,” Barnacle said. Meanwhile, since January, the FBI has notified 3,000 people they were fraud victims, though many more scams likely go unreported.