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Cryptocurrency scams are on the rise, with the Federal Bureau of Investigation reporting that Americans were defrauded out of $5.6bn last year — and that the victims are often educated, well-off people.
Last October, 68-year-old Debbie Fox had just finished “dreamy trips” to Italy, Spain and Greece. So when a man named Russell told her he was considering retiring to Europe, Fox was excited about exploring a relationship and possibly settling there with him.
The two met on Luxy – which advertises itself as an elite dating platform for millionaires – and would spend hours discussing books, movies, television, and their families. “Russell” advertised himself as a scientist and businessman with dual passports, “a man of affluence” who was looking for a deeper connection.
“By day three, we were video chatting at length,” Fox said. “There was no way he could be reading from a script, because there is no way that a script would know what I would be asking him. I have a tendency to go really deep on conversations, and he just kept pace. It felt really real.”
Then he called her with an emergency: he needed $48,000 to save a solar project in Saudi Arabia that had purportedly been interrupted by the Israel-Hamas war.
Fox vetted his alleged businesses and had received seemingly legitimate legal documents from Russell. So she took the risk and wired funds from her retirement account to another bank account that an investigation later found was flowing into crypto investments. A few weeks later, he asked for another $10,000, which Fox obliged.
“I was going by the fact that I was talking to a real human, that man whose picture you see,” Fox said.
She didn’t realize she had been swindled until December, when Russell’s alleged lawyer claimed he had been imprisoned and needed additional funds. Fox became a victim of something known as a romance scam, in which the victim is lured by a romantic impersonator and manipulated to send their money. Victims are duped for weeks or even months, and the aftermath can be brutal: entire life savings can be swindled, leaving people in financial ruin and struggling to handle the aftermath emotionally.
“There were days I was immobile,” Fox said. “I couldn’t get off the floor from the depths of despair.”
More and more Americans are becoming victims of cryptocurrency scams, according to the FBI.
The federal government received over 70,000 complaints of cryptocurrency scams in 2023. That’s a staggering increase of 45 percent since 2022.
Cryptocurrency experts spoke to The Independent about the most common scams involving virtual currency – and how best to avoid them.
By far the most common cryptocurrency scam was investment fraud, which happens when bad actors persuade people to purchase cryptocurrency, promising they will reap profits at low risks. According to the FBI, investment scams accounted for 71 percent of all crypto scams and represented over $3.96bn in lost money in 2023. The next four most popular cryptocurrency scams were in tech support, personal data breaches, extortion, and cases of false confidence or romance.
“Once you’re a victim, it is horrible,” Fox said. “Not just the reality of a broken heart from someone that you thought you were developing a relationship [with] that used your vulnerability against you [and] robbed you of money, but now you’re just left with guilt and shame, and have been clueless about what to do next.”
To avoid these scams, “we need to nurture the sense of digital hygiene,” according to Chengqi “John” Guo, a professor of computer information systems and business analytics at James Madison University.
Some of the habits he recommends may seem obvious. Don’t hand out your password to internet strangers. Double check with your company or bank about how they communicate sensitive information. Never trust suspicious actors urging you to download a foreign application. And you might want to double check if you get a pop-up asking to update your antivirus software – which is one of the most common scams since the birth of the internet.
But some of them are less obvious: it’s better to use your keyboard, instead of your mouse, to avoid data breaches that take advantage of how often you might click.
Of the 3,000 victims informed by the FBI this year, 75 percent were unaware they had been scammed.
“When it comes to daily consumption – like we go to grocery store, gas station – we rarely use these cryptocurrencies, so it doesn’t really get on the radar of the daily consumption activities for these people,” Guo said. “So maybe that’s another factor working in the favor of the scammers, because people don’t have that level of awareness.”
According to this year’s FBI report, people over 60 issued the most complaints about cryptocurrency scams, representing $1.6bn in losses. But the victims aren’t just older Americans, according to Erin West, a deputy district attorney in Santa Clara County, California.
“We are seeing plenty of victims in their 40s and 50s: plenty of really bright, well employed people that are getting hit,” West said. “They’re so embarrassed, and they’re like, ‘I can’t believe I fell for this. I’ve worked in financial services,’ or ‘I’m a lawyer.’ These scams – they’re that good that people that you would not expect to fall victim to them are falling victim to them.”
Avenues for accountability are scant, and chances for justice slim. Recovering funds is an arduous task, particularly as cryptocurrency transactions cannot be canceled or reversed, unlike standard bank transactions. And social stigmas, particularly for romantic dupes, add to the difficulty of prosecuting perpetrators.
“Individuals, at times, are embarrassed to actually report their victimization,” said FBI Supervisory Special Agent Nick Berta. “And then there’s challenges, although it is a public blockchain, for law enforcement to trace those transactions without the standard measures in place by US financial systems.”
Scams networks are often based out of Southeast Asia and Africa, making prosecution from the United States all but impossible. The highly elaborate schemes also victimize those who initiate the scams, deploying human trafficking victims who are coerced into scamming users on the web.
“I would say it is a rare chance these days where a victim will be able to recover any funds,” West said.
Guo says the widespread nature of cryptocurrency scams may pose a threat to societal well-being and demands serious attention: “It’s like the old saying: if you see one cockroach, that means you have a bunch of them hiding someone else. So if you see one manifestation of the cryptocurrency scam, believe me, there are a whole bunch of others that you don’t see.”
Since the trauma of her case, Fox says she remains in the process of recovery.
“I’m still not right,” she says. But her experiences have moved her to advocate for fellow victims. This fall, she is set to publish a romance suspense novel that portrays her personal experience of being psychologically manipulated.
She says: “Instead of putting the onus on victims, let’s shift the conversation and the resources to making life hell for criminals who want to do cyber crime.”
Editor’s Note: This article was amended on Sept. 16. It originally stated that Fox wired funds from her retirement account to Coinbase. However, that was inaccurate, as she actually wired the money to another bank account, and those funds eventually flowed into crypto investments.
