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- FTC spots 18-fold increase in social media scams during last five years
- Investments scams top the list, often involving cryptocurrencies
Social media has become a gold mine for scammers in 2021, as data from the U.S. Federal Trade Commission (FTC) reveals a large increase in the number of fraud incidents initiated via social media platforms.
More than 95,000 individuals reported that they lost money to fraud in 2021 after first being contacted on social media, more than doubling the number of such reports in the previous year.
Consumers reported losing about $770m to fraud initiated on social media during this period, representing around a quarter of all reported fraud losses. This is an 18-fold increase from 2017, according to the FTC.
The consumer body said this “disturbing trend” reveals that social media has become “a gold mine for scammers.”
Although reports were up for every age group, people between 18 and 39 were more than twice as likely as older adults to report losing money to scams that started on social media.
Americans were defrauded the highest sums to investment scams, followed by romance scams.
Investment fraud made up 37 percent of the total dollar losses, although this category accounted for only 18 percent of reported losses initiated on social media platforms.
In around two-thirds (64 percent) of these investment fraud cases, where a payment method was specified, the incident involved cryptocurrency.
At the same time, the number of reported scams related to crypto has skyrocketed since October 2020.
Previous FTC data shows that nearly 7,000 people were tricked into fake crypto investments between October 2020 and March 2021, at a loss of more than $80m. Their reported median loss stood at $1,900.
Although Americans paid the highest price for investment fraud, the largest number of reports (45 percent) came from people who lost money to online shopping scams.
More than two-thirds (70 percent) of these reports involved someone who ordered a product they saw marketed on social media but the product never arrived. The FTC notes that consumers named Facebook and Instagram as the most frequently used social media platforms in these types of incidents.
Social media fraud is an increasing problem in many countries.
The UK Financial Conduct Authority (FCA) has repeatedly spoken out against the “increasingly significant role” that social media platforms play in disseminating promotions of financial products and services that could harm consumers.
From April 2020 to March 2021, consumers submitted 30,000 complaints to the FCA concerning potential online scams, which include incidents spread via search engines as well as social media platforms. This represents a 77 percent growth compared with the previous 12-month period.
To address the threats, the government proposed the Online Safety Bill (OSB) last May.
Although originally not in scope, in its December report, the parliament’s joint committee on the OSB proposed to extend the bill for paid-for advertising services too.
The problem of online fraud “is most manifest in the paid-for space, so it does not make sense for the Bill not to deal with the very heart of the problem,” the FCA told legislators.
Similarly, consumer association Which? said: “[P]aid-for advertising on online platforms is a primary method used by criminals to target consumers and engage them in a [financial] scam, as it gives them instant access to large numbers of target audiences.”
The bill is aimed at reducing online harm by requiring platforms that enable the sharing of user generated content to protect users against illegal content and to put in place measures to protect children.
