The Federal Bureau of Investigation’s Internet Crime Complaint Center (IC3) has released a report revealing that Americans lost $5.6 billion to cryptocurrency fraud in 2023. 

This represents a 45% increase from the previous year, indicating a significant rise in digital currency scams. The report highlights over 69,000 reported cases, with investment scams accounting for 71% of the total losses.

The decentralized nature of cryptocurrencies poses substantial challenges for tracking and recovering stolen funds, according to the report. 

The FBI notes that due to the lack of traditional financial checks, it is often difficult to trace and reclaim lost assets. This difficulty is made worse by the global nature of cryptocurrency transactions.

The report highlights that older Americans, particularly those over 60, were the most affected by cryptocurrency fraud. However, individuals aged 30-39 also experienced significant losses. 

The majority of complaints were from the United States, with California leading in both the number of complaints (9,522) and the amount of losses ($1.2 billion).

Investment Scams Dominate Fraud Losses

The FBI's report shows that investment frauds, particularly those involving Bitcoin and Ethereum, have been the most prevalent, making up around 71% of the total losses.

Often, these scams are conducted via social media, email, or text message, offering high returns on investment. Scammers build trust over time and then move communications to encrypted apps like WhatsApp to enhance the legitimacy of their scams.

Emerging Scam Techniques

The report identifies several prominent types of scams contributing to the massive losses:

Call Center Scams: Representing about 10% of the total losses, these scams include fake tech support and impersonations of government agencies. Scammers use these tactics to deceive individuals into revealing personal information or making financial transfers.

Cryptocurrency Kiosks: These machines, which allow users to exchange cash for digital currencies, have become a significant vulnerability. Over 5,500 complaints related to crypto kiosks resulted in losses exceeding $189 million. The anonymity of transactions at these kiosks reportedly makes them attractive to scammers, who use them for various fraudulent activities.

Labor Trafficking and Scamming Operations

The FBI’s report also touches on the connection between crypto fraud and labor trafficking. 

Many scammers, particularly those operating in "pig butchering" schemes, are victims of human trafficking forced to participate in fraudulent operations. These victims are often lured by false job advertisements and subsequently targeted by scams claiming to recover lost cryptocurrency.

In response to the surge in fraud, new methods such as the “ZERO-KYC mechanism” have been proposed to counter peer-to-peer (P2P) crypto scams. 

The FBI urges individuals to exercise extreme caution when presented with investment opportunities from unknown sources.