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Study: Crypto and Investment Scams Skyrocket in 2020 and 2021

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2020 was a record year for investment and cryptocurrency scams. Almost 26,500 cases were reported to the government — and those cases resulted in a loss of $419 million. 2021 is on pace to exceed those numbers. 

The Motley Fool wanted to dig deeper into the rise of investment and cryptocurrency scams to understand how they happen, who they target, and how investors can better avoid them. 

To that end, we surveyed American adults that had been targeted by an investment or cryptocurrency scam and dug into data gathered by the Federal Trade Commission (FTC). 

We found that the use of cryptocurrency and social media by scammers has skyrocketed, many people don’t report when they’re targeted by a scam, and almost 75% of people targeted by fraud or a scam are less likely to invest in the future. 

Key findings

  • 2021 will be a record year for investment fraud: 14,079 investment scams were reported to the FTC in the first quarter of 2021, and victims lost $215 million in this quarter alone. Reports, the percentage of reports that reported a loss, median losses, and total losses are on pace to exceed those reported in 2020, which significantly surpassed 2019 numbers.
  • People under 40 are most likely to be targeted: People aged 30–39 are most likely to be targeted by scammers. The 20–29 age group reported the second-most cases. Those aged 40–69 reported higher losses from fewer cases. 
  • Fraud and scam education needs to improve: 45% of people targeted by scams said financial and government institutions have done a good or very good job educating the public about investment and cryptocurrency scams. 40% of Baby Boomers said those institutions have done a poor job — a higher percentage than any other generation. 
  • Scams are going unreported: Just 62% of those targeted by an investment or cryptocurrency scam filed a report with the government. Of those that didn’t file a report, 37% said they didn’t know they could. 
  • Scams make victims wary of investing: 58% of people targeted by an investment scam have since invested, although 75% of those targeted say they’re less likely to invest in the future.

What is an investment scam?

Investment scams aim to get individuals or businesses to provide money — often cryptocurrency — for an investment that will allegedly generate large returns. 

There are many types of investment scams, but they generally lure victims with promises of quick and large profits, only for victims to put up funds that are never seen again.

In this article, we use the terms “fraud” and “scam” interchangeably, because that’s how the FTC reports their data.

Americans lost over $419 million to investment fraud and scams in 2020

2020 saw over 25,000 investment fraud cases reported and over 20,000 cases involving a loss for the first time.

2021 is on pace to be another record-setting year for nearly every metric.

Between 2017 and the first quarter of 2021, all measures of investment fraud have increased consistently.

 

Investment scam reports

Reports including a monetary loss

% reporting loss

Median loss

Total loss

2017

15,747

7,343

46.63%

$416

$50,495,073

2018

14,747

8,376

56.80%

$566

$93,307,947

2019

18,042

11,766

65.21%

$741

$181,725,420

2020

26,483

20,746

78.34%

$1,582

$419,010,543

2021 Q1

14,079

9,927

70.51%

$2,350

$215,013,664

Data source: Federal Trade Commission (2021).

People aged 30–39 are most likely to get scammed

Between 2017 and the first quarter of 2021, Americans 30–39 years of age reported 7,617 investment scams, the most of any 10-year age band. Americans aged 20–29 followed with 6,927 reported scams. 

Even though the 20–29 age group reported the second most cases, they only had the fifth highest losses — people aged 40–49, 50–59, and 60–69 all reported higher losses from fewer reported cases.

Cryptocurrency is now the top payment method for investment scams and fraud

In 2020, cryptocurrency became the most common payment method used in investment scams and fraud.

Previously, wire transfer was the most frequently used method of payment. But the ease of moving money with cryptocurrency and the increasing popularity of crypto as an investment tool have made it a prime target for scams.

Since October 2020, Americans have lost more than $80 million to crypto fraud

Between October 2020 and March 2021, nearly 7,000 people reported losses as a result of crypto scams. Those reports include losses of more than $80 million, with a median loss of $1,900.

Editor’s note: cryptocurrency scams are a subset of investment scams in the FTC data.

That level is twelve times the number of reports and close to 1,000% more in reported losses compared to the same period a year prior, FTC data shows.

People aged 20–49 are most likely to report losses from crypto investment scams

Since October 2020, people aged 20–49 were more than five times more likely to report losses from crypto investment scams than older age groups. People aged 20–39 lost more on cryptocurrency investment scams than other types of investment scams, and over half of their reported losses were a result of crypto scams, according to the FTC.

People 50 and over were less susceptible to cryptocurrency scams but reported higher losses on them, per the FTC. 

2020 was the first year that social media was the most common contact method for investment scams

Recently, scammers have used social media and messaging apps, sometimes posing as celebrities, to reach out to investors and promise them high returns for a huge upfront payment and subsequent fees.

Websites and apps have also risen in popularity over the past year, overtaking the nebulous “other” category in 2020.

Here are some signs of an investment scam to watch out for:

  • Being unable to determine an alleged broker’s physical location
  • Being asked to deposit money (especially cryptocurrency) upfront
  • Communicating solely through social media or a messaging app
  • Being promised returns that are too good to be true

45% of respondents are happy with investment fraud education

Editor’s note: In the following sections, we talk about people who have been targeted by scams. This includes everyone who responded to our survey, whether they lost money to the scam or not. When we’re talking about respondents who actually lost money to the scam, we’ll say “victims” or “those who lost money to scams.”

29% of those targeted by investment or cryptocurrency scams surveyed by The Motley Fool said financial institutions and the government have done a poor or very poor job educating the public about those types of scams.

45%, on the other hand, said those groups had done a good or very good job.

How well do you feel that financial and government institutions have educated the public about investment and cryptocurrency fraud/scams? (This includes identifying, reporting, and recovering from these scams.)

They’ve done a very poor job

13.40%

They’ve done a poor job

16.00%

They’ve done an OK job

25.80%

They’ve done a good job

20.00%

They’ve done a very good job

24.80%

Data source: The Motley Fool survey of 500 investment and crypto fraud targets, June 2021.

40% of Baby Boomers said financial and government institutions have done a poor job

Baby Boomers were most critical of fraud education provided by financial and government institutions, with 14% saying they had done a very poor job and 26% saying they had done a poor job. 

Members of Generation X were the most positive about how those actors had done in educating the public. Disapproval from Generation X, millennials, and Gen Z were all below 30%. 

How well do you feel that financial and government institutions have educated the public about investment and cryptocurrency fraud/scams? (This includes identifying, reporting, and recovering from these scams.)

 

They’ve done a very poor job

They’ve done a poor job

They’ve done an OK job

They’ve done a good job

They’ve done a very good job

Silent Generation

16.67%

16.67%

33.33%

33.33%

0.00%

Baby Boomers

14.04%

26.32%

31.58%

17.54%

10.53%

Generation X

14.97%

11.38%

19.76%

19.76%

34.13%

Millennials

13.50%

16.00%

24.00%

22.00%

24.50%

Gen Z

8.57%

18.57%

40.00%

15.71%

17.14%

Grand Total

13.40%

16.00%

25.80%

20.00%

24.80%

Data source: The Motley Fool survey of 500 investment and crypto fraud targets, June 2021.

62% of investment scam targets filed a report with the government

Of people targeted by investment or cryptocurrency scams surveyed by The Motley Fool, 62% reported the scam to the government and 38% did not. 

While it’s good that over half of people that came in contact with a scammer filed a report, we’d like to see that number higher. 

Reporting scams to the government gives you a chance to get your money back if you suffered losses. It also helps law enforcement better investigate and stop scammers and fraudsters. Reports give authorities a fuller picture of what types of scams and fraud are prevalent, which lets them better…



Read More: Study: Crypto and Investment Scams Skyrocket in 2020 and 2021

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