As a follow up to our previous posts on digital assets and social media, the Federal Trade Commission recently published a Consumer Protection Data Spotlight on June 3, 2022. In the post, the FTC provides insights on the fraud reports submitted to the FTC from January 1, 2021 to March 31, 2022. According to the FTC, the fraud reports show that social media and digital assets are a “combustible combination for fraud” with nearly half of those who reported losing cryptocurrency to a scam saying that it “started with an ad, post, or message on a social media platform.” Since the start of 2021, more than 46,000 people reported losing over $1 Billion of cryptocurrency to scams, and during the reporting period, nearly four out of every ten dollars that was lost to a fraud that originated on social media was lost in crypto. This report is another example of agencies and courts taking note, and informing the public that the connection between social media and digital asset fraud is direct, and significant.
The top frauds reported by cryptocurrency losses were:
- investment related fraud ($575 Million);
- romance scams ($185 Million);
- business imposters ($93 Million); and
- government imposters ($40 Million).
According to the FTC, warning signs of a scam are:
- Only scammers will guarantee profits or big returns.
- Legitimate entities will not require you to buy cryptocurrency.
- Never mix online dating and investment advice.
On the same day, the FTC issued a press release that included a link to seek the public’s input on ways to modernize the agency’s business guidance titled “.com Disclosures: How to Make Effective Disclosures in Digital Advertising.” Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, notes that “companies are citing our current guidelines to justify dark patterns and other forms of digital deception” and “we are looking to update the guides to make clear that online tricks and traps will not be tolerated.” The FTC staff is seeking comment on several topics, including:
- sponsored and promoted advertising on social media;
- dark patterns, manipulative user interface designs on websites and mobile apps, and in digital advertising;
- whether current guidance adequately addresses advertising on mobile devices;
- how the guidance on hyperlinks can be strengthened to better protect consumers; and
- the adequacy of online disclosures across multiple webpages;
The FTC is seeking public comment through Tuesday, August 2, 2022. Information on how to submit comments can be found here.
Paul Guirguis assisted in the preparation of this post.