On November 10, 2022 the Consumer Financial Protection Bureau (CFPB) released a complaint bulletin (“bulletin”) that provides an analysis of consumer complaints the CFPB has received from October 2018 to September 2022 related to crypto-assets. The executive summary of the bulletin notes that during that time frame, the CFPB received more than 8,300 complaints related to crypto-assets. The bulletin also states that the majority of the complaints have been submitted within the last two years.
In its executive summary, the bulletin states that fraud, theft, hacks, and scams are a significant problem in crypto-asset markets. More specifically, data contained in the bulletin shows that approximately 40% of the crypto-asset complaints the CFPB has received since October 2018 complain of fraud and scams. The data further shows that approximately 25% of consumer complaints related to “transaction issues,” such as timing of transactions and the ability to transfer assets between platforms, and 16% of consumer complaints described that “money was not available when promised.”
In analyzing the complaints, the bulletin identifies several common risk themes that contribute to fraud and theft among crypto-assets. Three notable themes highlighted by the bulletin include romance scams, where a scammer will play on a victim’s emotions to extract money, scammers posing as customer service representatives, and “pig butchering.” The bulletin describes “pig butchering” as a scam in which fraudsters pose as financial successes and spend time gaining the victim’s confidence and trust, and coach victims through setting up crypto-asset accounts. Other risks the bulletin discusses include hacking, and the fact that crypto-assets often experience significant volatility. For example, the bulletin notes that as of October 3, 2022, Bitcoin is down more than 70% from its November 2021 high, and the market value of all crypto-assets have fallen by as much as 68% as of July 2022.
Toward the end of its analysis, the bulletin provides suggestions for consumers to protect themselves from fraud and theft. These suggestions include being aware of claims that promise huge rates of return. Additionally, the bulletin states consumers should be careful of a person who wants to show them how to invest in crypto-assets or asks them to send crypto. Finally, the bulletin suggests that consumers make sure they know how to contact the platform they are using if something goes wrong with a crypto-asset transaction.