With cryptocurrency investments rallying post-election 2024, consumers and financial institutions alike must stay alert to an ever-growing threat of crypto fraud. Offering many opportunities for investors, cryptocurrency is also a playground for scammers. As it becomes more integrated into our financial system and scams increase, crypto fraud prevention must be a priority. Fraud, in general, has continued to surge in the past several years. The FTC reports a staggering $10 billion in consumer losses to fraud in 2023, up from $3.5 billion in 2020. According to the FBI, cryptocurrency is fast becoming a favorite for scammers, not just in the murky realms of the dark web, but in everyday transactions. Fraud involving crypto represents more than half of the reported fraud losses in 2023 at $5.6 billion. These numbers are likely lower than the actual losses, as many victims choose not to report due to embarrassment that they were fooled, possibly by someone they trusted. Why is crypto fraud skyrocketing? It boils down to opportunity. Cryptocurrencies have become more mainstream and accepted as legitimate investments, attracting not only investors but also international crime syndicates and tech-savvy scammers. Here are some driving factors: • More Investors, More Targets: As cryptocurrencies gain traction, even less-savvy individuals jump in, often without a complete understanding of the risks. There are currently an estimated 560 million crypto owners worldwide, creating a larger victim pool for fraudsters. • More Types of Cryptocurrencies Are Entering the Market: Cryptocurrencies come and go, sometimes rather quickly. In the first quarter of 2024, there were approximately 9,000 active cryptocurrencies. Some are more legitimate than others, and investors should research them carefully. • A Hidden Transaction Trail: Crypto transactions’ decentralized, often anonymous nature makes it easier for fraudsters to stay concealed, and the growing popularity of digital assets creates an ideal breeding ground for deception. • Loose Government Regulation: The lack of regulation in the crypto space can create opportunities for fraudulent schemes. Although the regulatory agencies have pushed for enhanced regulation, it is unlikely that the incoming administration will call for oversight anytime soon. • Global Targeting: The U.S. is a prime target for scams because of its comparative wealth and willingness to embrace speculative markets. In addition, many Americans value online relationships, making them easy prey. Plus, let’s face it — many investors are drawn to get-rich-quick schemes. Should AI Be Blamed for the Rise in Crypto Fraud? Not entirely, but AI has made scams more convincing. While AI gets much of the blame, it’s one piece of the puzzle. AI‑generated phishing emails are grammatically flawless, and deepfake technology allows scammers to impersonate high-profile figures CRYPTO SCAMS AND CRYPTO FRAUD DETECTION FOR FINANCIAL INSTITUTIONS BY TERRI LUTTRELL CAMS-AUDIT, CFCS, COMPLIANCE AND ENGAGEMENT DIRECTOR, ABRIGO 11 In Touch
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