FTC says victims of crypto scams have lost more than $1 billion since 2021

The world of crypto continues to draw scam artists and fraud. People have reported losing a combined total of over $1 billion due to crypto scams since the beginning of 2021, according to an FTC report released today. From January 2021 through March of this year, more than 46,000 individuals filed a crypto-related fraud report with the agency. The median individual reported loss in these reports was $2,600.

Perhaps ironically, the most common coins used in scams are also the most widely used, as well as a top stablecoin. A total of 70 percent of scams used Bitcoin as the payment method, followed by Tether (10 percent) and Ether (9 percent). Ether is the prime currency of choice for NFTs, a relatively new crypto market where fraudsters and hackers have thrived.

Crypto investment scams were the most common type of scam reported to the FTC, accounting for an estimated $575 million in losses. Normally these scams target amateur investors by promising them large returns in exchange for an initial investment.

“Investment scammers claim they can quickly and easily get huge returns for investors. But those crypto ‘investments’ go straight to a scammer’s wallet,” wrote the FTC’s Emma Fletcher in a blog post.

Romance scams also account for a large slice of reported scams, totaling $185 million in losses. Many of these scammers reach individuals by social media or dating apps. A type of dating app scam known as “pig slaughtering” — where criminals build a fake relationship with a victim in order to con them into investing in crypto — has become more common, reported CoinTelegraph.

It’s important to note that the FTC report is only a small snapshot of how much crypto fraud has truly occurred, since the agency is relying on direct reports submitted by victims. An FTC paper estimated that less than five percent of fraud victims reported it to a government entity, and likely an even smaller number report to the FTC. As crypto becomes more popular, the number of scams have also increased. Blockchain platform Chainanalysis estimated that illicit addresses received over $14 billion in crypto last year, nearly twice the amount in 2020.

Democratic lawmakers want FTC to investigate controversial identity firm ID.me

A group of Democratic lawmakers led by Senator Ron Wyden of Oregon is calling on the Federal Trade Commission to investigate ID.me, the controversial identification company best known for its work with the Internal Revenue Service. In a letter addresse…

Mining Capital Coin CEO indicted in $62 million crypto fraud scheme

Mining Capital Coin CEO and founder Luiz Capuci Jr. was — in an indictment unsealed yesterday — accused by the DOJ of allegedly running a $62 million global investment fraud scheme. He’s the latest of severalcrypto company heads who have recently been similarly charged.

Through his company, Capuci convinced investors to purchase “Mining Packages,” a global network of cryptocurrency mines that promised a certain return on investment every week. But instead of using investors’ funds to mine cryptocurrency as he promised, the DOJ alleges that Capuci diverted the funds to his own cryptocurrency wallets. Another MCC product known as “Trading Bots” operated under the same false pretenses. Capuci claimed that the bots operated in “very high frequency, being able to do thousands of trades per second” and promised investors daily returns.

“As he did with the Mining Packages, however, Capuci allegedly operated an investment fraud scheme with the Trading Bots and was not, as he promised, using MCC Trading Bots to generate income for investors, but instead was diverting the funds to himself and co-conspirators,” wrote the DOJ in its indictment.

MCC seemed to have all the workings of a pyramid scheme. Capuci recruited affiliates and promoters to lure investors. In return, he promised the promoters a number of lavish gifts, including Apple watches, iPads and luxury vehicles.

Currently the FBI’s Miami Field Office is investigating the case. The DOJ has charged Capuci, who is from Port St. Lucie, Florida, with conspiracy to commit wire fraud, conspiracy to commit securities fraud and conspiracy to commit international money laundering. If found guilty, he faces a maximum sentence of 45 years.

In a review of the cryptocurrency mining platform, crypto blogger Peter Obi noted that the combination of MCC’s $50 monthly fee for membership and its steep 3% withdrawal fee meant that investors were unlikely to make a profit unless they referred other investors. He pointed out that such a referral process was “particularly worrying” because it was consistent with other past crypto scams.

Indeed, a number of crypto leaders have been accused by authorities of running Ponzi schemes in recent years. Earlier this year the DOJ indicted Bitconnect founder Satishkumar Kurjibhai Kumbhani for allegedly running a $2 billion Ponzi scheme — believed to be the largest virtual currency pyramid scheme in history.

Capuci never registered his company with the SEC. The agency today issued a fraud alert for the company. According to the SEC press release, Capuci and his associates successfully convinced 65,535 investors to purchase mining packages worldwide and promised daily returns of one percent, paid weekly for over a year. In total, the group netted $8.1 million from the sale of the mining packages and $3.2 million from initiation fees.