Scams are rampant in the cryptocurrency markets, where the massive rise in Bitcoin, lack of regulation and anonymity of digital money have created a fertile environment for fraudsters.
Consumers told the US Federal Trade Commission that they lost nearly $82 million during cryptocurrency fraud during the fourth quarter of 2020 through the first quarter of 2021, more than 10 times the amount over the same six-month period a year ago, according to the US Federal Trade Commission. For The Wall Street Journal.
From October to March, the price of Bitcoin jumped about 450% to nearly $59,000, while rival currencies such as Ether and Dogecoin also rose. Bitcoin has since quickly fallen back to around $36,000, but it's still well above the value it reached when it traded over the past year.
The scammers targeted everyone from small investors looking for investment advice via social media, who backed an Australian cryptocurrency fund manager who was recently accused of conducting a $90 million scam.
Sebastian, a 28-year-old British cryptocurrency investor and pharmacy technician, says he lost about $10,000 of ether to a crypto project whose anonymous creators disappeared in May.
He noted that the creators of the 'LUB Token' are building a crypto exchange via the Telegram messaging app. They promoted LUB, on their now-defunct website, a new cryptocurrency that promised daily returns of up to 10%.
Sebastian, who lives on the outskirts of London, said he usually researches crypto projects carefully before investing, but he broke his rule and followed suit. He asserted that he made several deposits in the digital wallet controlled by LUB to the point that he promoted the project himself on Reddit despite some warning of the hoax.
'I'm ashamed and I still can't understand how stupid I was,' said Sebastian, who asked that his last name not be used so he wouldn't be targeted by online trolls.
Hundreds of people with similar stories, mostly in Europe, joined Telegram groups, the most famous of which was 'LUB Token = SCAM!!!', and the manager of one of the groups, using the name Tobias, estimated that victims in Germany lost between 500,000 Euros, and 1.5 million euros ($600,000 to $1.8 million) for the fraud. A police spokesman in the city of Aalen, which received one complaint in May, said German police were investigating the LUB operation across the country.
Despite this, it is difficult to quantify how much money investors lose due to cryptocurrency fraud. But the FTC's numbers are based on self-reporting by victims of fraud, and are largely limited to the United States, so they likely only reflect a slice of the total losses.
