The Consumer Financial Protection Bureau said fraud and scam reports comprise the top complaint it receives about virtual currencies — and that customers are finding little help from companies when it happens.
In an analysis published Thursday, coming as FTX's potential collapse has roiled the entire industry, the CFPB detailed how reports of fraud make up about 40% of the more than 8,300 cryptocurrency-related complaints it received between October 2018 and September 2022.
“Our analysis of consumer complaints suggests that bad actors are leveraging crypto-assets to perpetrate fraud on the public,” CFPB director Rohit Chopra said in a statement. “Americans are also reporting transaction problems, frozen accounts, and lost savings when it comes to crypto-assets. People should be wary of anyone seeking upfront payment in crypto-assets, since this may be a scam."
The analysis found "that complaints related to crypto-assets may increase when the price of bitcoin and other crypto-
assets increase," as noted in the report. With prices falling rapidly this year, fraud and scam reports have captured a greater share of overall complaints.
"This issue appears to be getting worse, as fraud and scams make up more than half of virtual currency' complaints received thus far in 2022," the report said. "Some consumers stated that they have lost hundreds of thousands of dollars due to unauthorized account access. The prevalence of fraud and scam complaints raises the question of whether crypto-asset platforms are effectively identifying and stopping fraudulent transactions."
A common scam, the report found, is called "pig butchering." As described in the report, "fraudsters spend time gaining the victim’s confidence, trust, and romantic affection in order to get victims to set up crypto-asset accounts, only for the scammers to ultimately steal all their crypto-assets."
The FBI has also warned consumers about pig-butchering scams.
Consumers also reported "SIM-swap" attacks among methods hackers are using to exploit two-factor authentication and gain access to accounts. "Companies often responded to these complaints by stating that consumers are responsible for the security of their accounts," the report said.
Fraud and scam reports represented about 63% of the crypto-related complaints received by the CFPB in September, the most recent month analyzed by the agency. The second most common complaint, "other transaction problems," marked 15% of complaints.
The report comes near the end of a tumultuous week, even by the standards of the rollercoaster crypto industry. FTX's unraveling and Binance's decision to back away from a deal to acquire it has had ripple effects across the sector. The largest cryptocurrency, bitcoin, has fallen 16% over the past five days.
While the SEC and CFTC have been seeking to exercise oversight of crypto exchanges, the CFPB supervises electronic fund transfers and has broad powers to take action against financial practices it views as unfair, deceptive, or abusive. When the agency receives a complaint, it is typically sent to the company for a response and can be forwarded to other regulatory agencies for further investigation.
The full CFPB crypto analysis is available on its website.
Correction: An earlier version of this story misstated the second most common complaint to the CFPB. This story was updated on Nov. 10, 2022.