Cryptocurrency scams have increased by 23% in 2023 compared with the same period last year, according to Lloyds Banking Group.
In a report that collated accounts held at Lloyds Bank, Halifax and Bank of Scotland between January and September 2023, it found that victims were on average losing £10,741 to scammers, up from £7,010 last year. This is more than any other type of scam, including romance scams or purchase scams.
Victims of cryptocurrency scams typically make an average of three payments before they realise they have been scammed, taking around 100 days from the date of the first transaction before they report it to their bank. By then, the money is usually long gone and cannot be reclaimed by the bank.
The analysis also found that 66% of all investment scams start on social media, with Facebook and Instagram the most common sources. Nearly a quarter of all victims for crypto scams are 25- to 34-year-olds, who are often tempted by the supposed “get rich quick” promise of cryptocurrency trading.
App-based challenger bank Revolut was the most common recipient of Faster Payments made by crypto investment scam victims at Lloyds Banking Group.
“Investing can be a great way to make money, but you need to make sure your money is going to a trusted, genuine company,” said Liz Zeigler, fraud prevention director at Lloyds Bank. “Crypto is a highly risky asset class and remains largely unregulated, which makes it an attractive area for fraudsters to exploit. If something goes wrong, you’re unlikely to get your money back.”
The Financial Conduct Authority (FCA) has warned of the danger of investing in cryptocurrencies and the risk of scams. But scammers go to great lengths to convince investors that they are honest investment managers.
The report detailed two main ways that fraudsters trick investors through cryptocurrency scams. The first is called “The Illusion”, where there is no genuine investment platform or cryptocurrency involved. The victim, who is tricked by what Lloyds Bank describes as an “investment manager”, is promised huge returns through fake investment accounts or small amounts of money transferred back into their own account.
The second way is known as “The Takeover”, whereby a genuine investment account is set up by the victim or in the victim’s name by the “investment manager”, from which the funds are then handed over to the scammers or to their digital wallet.
“Predictably, social media platforms are the main breeding ground for this type of scam, with a mix of bogus ads, fake endorsements and cloned accounts being key to fraudsters’ methods,” said Zeigler.
“It’s time these tech firms took responsibility for protecting their customers, stopping scams at source and contributing to refunds when their platforms are used to defraud innocent victims.”