Investment Fraud Hits All-Time High as Crypto Scams Jump

Investment Fraud Hits All-Time High as Crypto Scams Jump

Last year’s record $3.82 billion in losses was double that of 2021's.

Michelle.Lodge310x310
|
Reviewed by: Lisa Barr
,
Edited by: Ron Day

Cases of investment fraud, the leading type of swindle in the U.S., have more than doubled since last year. 

That’s according to the “The 2023 State of Investment Fraud,” released by Carlson Law, a Miami Beach, Florida, law firm that specializes in investment fraud. 

Investors last year lost a record $3.82 billion due to investment fraud, according to the study, up more than double from $1.6 billion the prior year. Scams connected to the rise in cryptocurrency contributed to the big jump.  

The dominance of technology is another factor for the rise. Technology enables fraudsters to prey on victims using artificial intelligence, such as voice cloning.  

“In 2022, a record $2.57 billion was lost to crypto-investment scams,” according to the report. “Traditional scams, including Ponzi schemes (such as Bernie Madoff’s $64 billion fraud), pyramid scams and real estate fraud were also prevalent,”  

The numbers reflect fraud from both big-time operators like alleged crypto fraudster Sam Bankman-Fried and small-time scammers operating out of makeshift locales. Bankman-Fried, who founded the crypto exchange FTX and its crypto trading platform Alameda Research, is under formal accusation for alleged financial crimes. 

Investment Fraud by the Numbers 

Despite the increase in overall investment deceit, there were fewer complaints against financial advisors, according to the Financial Industry Regulatory Authority. The group said that allegations against financial advisors fell from 744 in 2021 to 699 in 2022.  

Investors at all income levels and ages are subject to fraudulent approaches, but some categories are more vulnerable. The Federal Bureau of Investigation reported that people between 30 and 49 are most often the victims of investment frauds. The bureau said less tech-savvy senior citizens can suffer tremendously, as they lost nearly $1 billion in investment fraud in 2022. Professional athletes lost $585 million in investment swindles between 2004 and 2018. 

The report showed the amounts taken and their categories were investments: $3.8 billion; imposters: $2.6 billion; business and job opportunities: $367 million; online shopping and negative reviews: $358 million; and prizes, sweepstakes and lotteries: $302 million.  

Investors are getting fleeced more often in specific states than in others. California investors took the biggest hit, at $869 million. The other states in the top five in losses are Florida, Texas, New York and New Jersey. 

 

Follow Michelle Lodge on Twitter @lodgemich 

Michelle Lodge is a journalist who is a contributor to many sites: Fortune, Money, Time, Barron’s, Investopedia, CNBC.com and Bloomberg.com.