On the heels of a tumultuous few days, weeks, and months for the cryptocurrency industry, the Consumer Financial Protection Bureau (CFPB) has released a 45-page bulletin detailing consumer reports of frauds, scams, and other malfeasance related to crypto — but is it a day late and a dollar short?
The bulletin goes into detail about the different types of issues consumers have been having and which groups have been more affected than others. Unsurprisingly, the prize for the most reported issue for consumers involved in cryptocurrency is fraud, with reports of theft, hacks, and scams outpacing all other categories by quite some way.
In what might be the only bit of good news in the bulletin, consumer reports of problems with crypto companies appear to ebb and flow with the price of bitcoin, peaking in late 2021 and early 2022. With prices for most cryptocurrency assets now reaching two-year lows, perhaps we’ve seen the worst of the reported fraud for the time being.
While the CFPB is only able to react to customers, not proactively set rules and regulations, it leaves many in the industry wondering if the bulletin will actually be able to help crypto consumers.
After all, the CFPB’s warning arrives right after crypto’s biggest burn in history already took place. The surprise failure of one of the most trusted exchanges, and the soon-to-be bankruptcy filing of its founder and number-two Biden donor, Sam Bankman-Fried, has left countless retail investors in the lurch. For many crypto consumers, it’s hard to picture the utility of the CFPB’s bulletin when it arrives after the fact.
To be fair to the CFPB, it issued warnings and consumer protection guidelines regarding digital assets as far back as 2014.
Older citizens, service members targeted
More troubling than some of the obvious takeaways was that older individuals and service members seemed to be specifically targeted more than others.
In fact, people aged 60+ collectively lost over $1.5 billion to cryptocurrency-related issues in 2021 alone.
The most oft-cited issues seen by both groups appear to be a mix of phishing scams and SIM swapping. And there are some very unfortunate examples:
“In one instance,” read the report, “a consumer lost their life savings after two fake customer support scams… In response, the company stated that the consumer was a victim of a scam, and that the funds were not recoverable,” (our emphasis).
In another complaint, a servicemember stated that they had “lost crypto-assets as the result of identity theft, despite taking extensive steps to stop the fraudulent transactions from taking place… In response, the company stated that the consumer was a victim of a SIM swap hack. The company also stated that it could not reimburse the consumer, and that the consumer also would need to repay the company over $3,500 as a result of the reversed transaction.”
Since 2018 the CFPB has received thousands of consumer complaints regarding cryptocurrency companies. While the agency can’t enforce any actions, it can make suggestions, and seems to err on the side of retail customers. They argue the statistics raise “the question of whether crypto-asset platforms are effectively identifying and stopping fraudulent transactions.”
The bulletin also notes, “crypto-asset platforms sometimes hide behind terms and conditions.”
Advice for consumers
Consumers are asked to watch for signs of scams, carefully read through terms of service, check for arbitration clauses, access resources provided by the government, and report suspicious claims to the FDIC. And it also offers a little advice that we could all stand to remember every once in a while:
Don’t mix crypto-assets and romance.