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A virtual private network firm predicts that total losses from investment scams will reach more than $3.5 billion next year, as con artists exploit new technologies such as digital tokens and other entities.

The business investment segment has the most severe problems when it comes to online fraud, according to a recent commentary by Atlas VPN.

“With the appearance of new promising technologies, like NFTs and blockchain, many unique investment opportunities have sprung up in the last couple of years. Unfortunately, a significant portion of those companies do not have the investor’s best interests in mind,” the firm said in an article dated November 15 and written by Edward G. 

The rise of non-fungible tokens and digital assets more broadly have often prompted excited talk of new investment channels and techniques in the wealth management industry. (See an overview of developments here.) Blockchain technology that underpins many of these entities is also seen as changing how banks and other financial players operate. But perhaps, unsurprisingly, the rise of new technologies can draw in bad actors.

“The rapid evolution of the world wide web and the commercial world in general outpaced security measures that were supposed to protect individuals from getting abused in these types of deals,” the firm said. 

Atlas VPN cited data from the Federal Trade Commission showing that US citizens lost $2.66 billion to investment scams between the first and third quarters of this year, surging by 50 per cent over $1.77 billion lost in 2021. Investment fraud in the US has skyrocketed 28 times in the past five years.

“Since 2018, investment fraud has been growing by, on average, 149 per cent per year,” the article continued. 

The article said that most investment fraud victims transfer the funds in the form of cryptocurrencies, which are hard to track down and recover because the whole system is based on anonymity and decentralization. 

In addition, threat actors can employ various services, like cryptocurrency tumblers, to cover their tracks to the point of becoming almost untraceable. 

Such reports add to unease in the wider digital assets/cryptocurrencies space, rocked by the bankruptcy of Bahamas-registered cryptocurrency exchange FTX and the slide in prices for cryptos since January.

NFT frauds
One area being exploited is NFTs. According to a report by technology review website cloudwards.net, in 2021 NFT trades totaled a whopping $17 billion, up 21,000 per cent from the previous year. 

The website warned: "Most NFT fraudsters aim to get access to your NFT account. They do this by using a variety of phishing cons to get you to hand over your private wallet key. Once these scammers access your account, they’ll quickly drain it before you even get wind of the scam."

One type of con is the "rug-pull" ploy: A rug-pull refers to a scam where developers hype an NFT but pull out after receiving substantial funds from investors. Another trick is the "bidding scam": Bidding scams can occur in the secondary market when someone tries to sell a NFT. When the NFT is put up for sale, scammers place the highest bid and people naturally want to sell it to them. However, these scammers can change the cryptocurrency used for the bidding without the seller knowing.