Annual fraud report highlights crypto insecurity

By Eden Iscil, Public Policy Associate

Earlier this month, NCL’s Fraud.org project released its annual Top Ten Scams report. After collecting thousands of consumer complaints, we sorted through the data to share the major trends from the past year. We saw some interesting trends! 

As the pandemic has entered its third calendar year, notable patterns included median dollar losses from fraud reaching a 10-year high and investment-related scams increasing by almost 170 percent, likely due to the rising popularity of cryptocurrency. So, consumers who lose money to scams are losing more of it. And cryptocurrency-related scams are something we all need to start paying attention to. 

These are the top ten scams reported to Fraud.org in 2021: 

  1. Prizes/Sweepstakes/Free Gifts  
  2. Internet: General Merchandise  
  3. Phishing/Spoofing  
  4. Fake Check Scams  
  5. Friendship & Sweetheart Swindles  
  6. Investment: Other (incl. cryptocurrency scams)  
  7. Advance Fee Loans, Credit Arrangers  
  8. Family/Friend Imposter  
  9. Computers: Equipment/Software (incl. tech support scams)  
  10. Scholarships/Grants 

The categories with the highest median losses were fake check scams at $2,000 and investment scams at $1,750. 

Focus: Cryptocurrency driving investment fraud 

Fake check scams have often scored near the top on our annual trend reports, but investment scams jumped several ranks, more than doubling their share of consumer complaints. Given the explosive growth of cryptocurrency usage in 2021, the emerging market likely provided an opening for fraudsters to take advantage of still-developing regulations and a lack of consumer knowledge about these new forms of investing.  

Fraud.org’s data appears to take the same shape as trends from the Federal Trade Commission (FTC), which had reported a ten-fold increase in cryptocurrency fraud. The FTC’s data spotlight on cryptocurrency scams also included a median loss of $1,900, a figure further demonstrating the heightened risk that consumers face within this sphere. Unfortunately, consumer protections in cryptocurrency usage are largely a patchwork of state-by-state rules, with some trading regulated by the Securities and Exchange Commission (SEC). 

Notably, Bitcoin and Ethereum (the two most popular cryptocurrencies) have so far been exempt from the SEC’s strictest oversight requirements, as it is considered a commodity rather than a security. The lack of comprehensive, nationwide protections coupled with the fact that these coins exist to be anonymous, instant, and irreversible creates an unsafe environment for consumers—especially ones who may be entering this space for the first time.  

Although media buzz has generated a lot of interest in crypto, with reports often centered on the potential for eye-popping returns, these articles do a disservice to readers if they don’t include the risks involved. Market volatility, a lack of consumer protections, and environmental damage only scratch the surface when it comes to hazards related to virtual currencies. These liabilities can be minimized by sticking with traditional forms of payment and investment—pending comprehensive regulation of digital coins. 

The full Top Ten Scams Report for 2021 can be found here. Additionally, Fraud.org’s February Fraud Alert includes great tips to help consumers better protect themselves against 2021’s top scams.