Investors Lost Record High $5.6B to Crypto Scams in 2023, FBI Says

2023 data from a recently released report shows that out of over 69,000 cases of crypto-related crime reported to the agency last year, almost half were instances of investment fraud, which accounted for a staggering $4 billion in losses. This type of fraud was not only the most prevalent but also the costliest. It’s worth noting that despite crypto crimes comprising just 10% of the FBI’s total complaints, the total loss from these incidents, amounting to $5.6 billion, represented almost half of the overall losses reported by complainants.

As an analyst, I’ve noticed a significant surge in investment fraud schemes, particularly those involving digital assets such as cryptocurrencies. Last year, the most prevalent form was what the FBI referred to as “confidence-based” scams, often colloquially known as “pig butchering.” These elaborate cons unfold over an extended period, with swindlers initially building trust with their targets, often through messaging apps. Once a rapport is established, they persuade their victims to invest substantial sums into fraudulent crypto platforms, from which they are later unable to withdraw funds.

The FBI’s findings indicate that numerous victims of swindles like pig butchering or investment schemes have racked up substantial debt as a result of their financial losses. Interestingly, individuals between 30 and 49 years old filed the most complaints concerning these fraudulent investments, but those over 60 reported the largest losses – a staggering $1.24 billion in the previous year.

Last year, the IC3 accepted grievances from both U.S. citizens and foreigners regarding cryptocurrency matters. However, a staggering 83% of all such reports they received were submitted by American investors. Among these complaints, California residents stood out with the highest number (9,522) and the largest total losses ($1.2 billion).

Human trafficking nexus

2022 research conducted by ProPublica (later confirmed by the UN and others) revealed that numerous individuals involved in fraudulent cryptocurrency investment schemes are, sadly, victims of human trafficking who are compelled by ‘pig butchering’ gangs operating predominantly in Southeast Asia to execute these scamming activities.

As an analyst, I’d rephrase that as follows: When venturing overseas, U.S. citizens should be cautious of fraudulent job offers potentially tied to forced labor situations at shady locations abroad, as per the FBI’s advisory.

The substances coerce laborers unwillingly and employ threats to make them take part in fraudulent business schemes, according to the report. Malicious individuals place misleading job listings on social networking platforms and job boards across the web, mainly targeting people from Asian regions, as stated in the report.

The report reveals that many workers are expected to cover their own travel costs and other expenses, which can leave them in debt right from the start. They then find themselves having to work to clear this debt while also managing their living costs. The unscrupulous individuals exploiting these workers use their increasing financial obligations and fear of local authorities as tools for control. In some cases, trafficked workers are even bought and moved between different facilities, thereby increasing their already heavy debts.