Consumers lost $532 million to cryptocurrency-related scams in the first two months of 2018, an official for the Federal Trade Commission said Monday.
Speaking during an event focused on cryptocurrency scams and fraud, Andrew Smith, director of the trade watchdog’s Bureau of Consumer Protection, offered the figure and said that the figure could swell into the billions by the end of the year.
“Consumers will lose more than $3 billion by the end of 2018,” he told attendees of the event, which was live-cast on Monday.
One part of the problem is a lack of care on the part of investors. This was an issue highlighted by Joe Rotunda, enforcement director for the Texas State Securities Board. And it’s an especially acute one set against the backdrop of a huge rise – and subsequent fall – in the value of cryptocurrencies over the past six months.
Coin Center director of research Peter Van Valkenburgh said that people get sucked into fraud – from exit scams to pump-and-dump schemes – simply because they’re looking to see a higher return on their investment.
“I think nobody should ever buy any more cryptocurrency, put anymore [into] cryptocurrency than what they are completely willing to lose … if you are willing to participate at all,” Van Valkenburgh remarked, adding:
“That is a message that needs to be repeated and repeated.”
Rotunda said he believes that “regulators need to be proactive in any type of new market, especially this type. We didn’t have the public being pitched different types of investments like this on the scale a year ago. This is something that blew up late last year.”
“Regulators need to number one, identify companies that are trying to do it right and work with [them],” he remarked. “The companies that are trying to do it right [should] get a telephone call from the regulator, not a cease-and-desist order, right? Not a lawsuit. We can usually work with them … [and] we need to identify the fraudulent schemes and we need to act quickly and stop them.”
As might be expected, the event also saw calls for approaches to self-regulation, an idea that has seen advancement from both public and private sources in recent months.
Yet in the end, the discussion fell to a common recommendation: investors should do their due diligence.
“If you yourself are not capable of explaining to somebody what a token’s supposed to do, you should not buy the token,” said Van Valkenburgh. “If you can’t tell the wheat from the chaff, or what is techno-gibberish or actual innovation, you should not participate.”
FTC panel image via FTC