CFPB publishes new bulletin analyzing surge in crypto asset complaints

CFPB publishes new bulletin analyzing surge in crypto asset complaints

Washington DC – Today, the Consumer Financial Protection Bureau (CFPB) released a new complaint bulletin highlighting complaints the CFPB received related to cryptoassets. Consumers most commonly reported experiencing fraud, theft, account hacking and fraud. Consumers also had problems carrying out transactions and transferring assets between exchanges. Many consumers had problems accessing funds in their account due to direct platform errors, identity verification issues, security blocks or due to technical issues with platforms. Poor customer service is a common theme across crypto-related complaints.

“Our analysis of consumer complaints suggests that bad actors are exploiting cryptoassets to perpetrate fraud on the public,” said CFPB Director Rohit Chopra. “Americans are also reporting transaction problems, frozen accounts and lost savings when it comes to cryptoassets. People should be wary of anyone seeking prepayment in cryptoassets, as this could be a scam. We will continue our work to keep the payment system safe from fraudsters who targets Americans.”

A crypto-asset is a private sector digital asset that relies primarily on cryptography and a distributed ledger (such as a blockchain) or similar technology. These assets are also often referred to as “virtual currencies”, “cryptocurrencies”, “crypto-tokens”, “cryptocoins” or simply “crypto”.

Fraudsters often target cryptoassets as it can be difficult to determine the person or persons behind many cryptoasset addresses, and there are a number of techniques fraudsters use to hide the movement of cryptoassets to other accounts. This can make tracking crypto assets stolen by fraudsters more time-consuming for regulators and law enforcement.

As the price volatility and use of crypto-assets has increased in recent years, there has been a similar increase in complaints received by the CFPB about these financial products. From October 2018 to September 2022, the CFPB received more than 8,300 complaints related to cryptoassets, and most of them received in the last two years. For approximately 40% of crypto-asset complaints handled since October 2018, consumers listed scams and fraud as the main concern. Various crypto-asset transaction issues accounted for about 25 percent of complaints, while problems with assets not being available when promised accounted for about 16 percent of complaints.

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The bulletin identified several common risk themes when analyzing complaints about cryptoassets. Hacks by malicious actors have destroyed crypto-assets, leading to significant financial losses for consumers with no way to recover stolen funds.

Other risks identified in the bulletin include:

  • Romance scams and “pig slaughter”: Crypto assets are often targeted in romance scams, where fraudsters play on a victim’s emotions to extract money. Some scammers use a “pig slaughtering” technique, where scammers spend time gaining the victim’s confidence, trust and romantic affection to get victims to create accounts for cryptoassets, only for the scammers to eventually steal all the cryptoassets. Additionally, with the lack of customer service options for many crypto-asset platforms, there are opportunities for attackers to impersonate customer service representatives to gain access to customers’ accounts and steal crypto-assets.
  • Difficulty in obtaining compensation: In situations where consumers have been defrauded, or had their account hacked, they are often told there is nowhere to turn for help. In addition, crypto-asset platforms and service providers tend to require mandatory arbitration and limit class-action lawsuits to use their service. Important terms for using a service can be buried in the terms and difficult to find on a platform.
  • Fraudulent transactions: Complaints show that some crypto-asset platforms only appear to take steps to verify the authority of a person to act on behalf of a customer after receiving a complaint from that customer, and often only after multiple escalations from that customer. Some complaint patterns, such as a fraudster making hundreds of small transactions to the same wallet, suggest that fraudsters may be aware of and intentionally avoid checks to prevent money laundering and fraud.
  • Risk of identification: Some users of blockchain technology are unaware of the public nature of the ledger that records every transaction of a crypto-asset. Malicious actors may be able to link these transactions and the crypto address with a consumer’s identity or other transactions.
  • Higher asset volatility: In recent months in particular, cryptoassets have seen significantly more volatility in value than currencies backed by governments. Some crypto assets have gone to zero or had their assets frozen by exchanges.
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The CFPB advises consumers to:

  • Be aware of common scams: In addition to romance and “pig slaughter” scams, other tricks used by malicious actors include merchant scams, which promise goods or services delivered to the victim in exchange for crypto-assets, only for the victim to find out about the business. was false. Both CFPB and Federal Trade Commission have online resources available to spot common scams. There is no government agency or financial regulator that insures crypto assets.
  • Report suspicious FDIC insurance claims: Consumers should also be aware of websites and apps that may fraudulently suggest government approval or insurance protection of crypto-assets. Companies that misuse the name or logo of the FDIC or otherwise misrepresent to consumers about deposit insurance coverage of cryptoassets are likely to violate the Consumer Financial Protection Act’s prohibition against deception, as noted in the CFPB’s May 2022 circular on the subject
  • Submit a complaint to the CFPB: Consumers who have problems with a consumer financial product or service can file a complaint with the CFPB online or by calling (855) 411-CFPB (2372). The CFPB has been handling complaints and warning consumers about the risks of virtual currencies since 2014.

For complaints to be published in the public consumer complaint database, they must be sent to a company for a response. Many virtual currency complaints are not published in the database as a result. Complaints are often referred to other supervisory bodies for processing. The CFPB shares complaints with the FTC Sentinel and makes them available to government agencies through the CFPB’s secure government portal. These complaints are also available to CFPB staff for review and analysis.

Read today’s Complaint Bulletin.

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The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces federal consumer laws and ensures that markets for consumer financial products are fair, transparent and competitive. For more information, visit consumerfinance.gov.

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