Crypto Scams Are the Top Threat to Investors by Far

A new survey urges investors to exercise caution before purchasing popular and volatile unregulated investments, especially those involving cryptocurrency and digital assets. The North American Securities Administrators Association (NASAA) released, January 10, 2022, its annual list of top investor threats and urged caution before purchasing popular and volatile unregulated investments – especially those involving cryptocurrency and digital assets. NASAA also announced guidance for investors, including steps to take to protect from fraud in the new year.

“Stories of ‘crypto millionaires’ attracted some investors to try their hand at investing in cryptocurrencies or crypto-related investments this year, and with them, many stories of those who bet big and lost big began appearing, and they will continue to appear in 2022,” said Enforcement Section Committee Co-Chair Joseph P. Borg, Alabama Securities Commission Director.

“The most common telltale sign of an investment scam is an offer of guaranteed high returns with no risk. It is important for investors to understand what they are investing in and with whom they are investing,” said Melanie Senter Lubin, NASAA President and Maryland Securities Commissioner. She added that “Education and information are an investor’s best defense against investment fraud,” continued Lubin.

According to the survey, the top threats to investors were determined by surveying North American securities regulators to identify the most problematic products, practices or schemes. The following were cited most often by state and provincial securities regulators:
1. Investments tied to cryptocurrencies and digital assets,
2. Fraud offerings related to promissory notes,
3. Money scams offered through social media and internet investment offers and,
4. Financial schemes connected to Self-Directed Individual Retirement Accounts.

The survey report notes that digital assets “do not fall neatly into the existing investor regulatory framework,” so it may be easier for promoters of these products “to fleece the public.”

“Before you jump into the crypto craze, be mindful that cryptocurrencies and related financial products may be nothing more than public facing fronts for Ponzi schemes and other frauds,” said Enforcement Section Committee Vice-Chair Joseph Rotunda.

Rotunda explained that investments in cryptocurrency trading programs, interests in crypto mining pools, crypto depository accounts and securitized tokens should “be seen for what they are: extremely risky speculation with a high risk of loss.”

According to the survey, scammers took home a record $14 billion in cryptocurrency in 2021, thanks in large part to the rise of decentralized finance (DeFi) platforms. Losses from crypto-related crime rose 79% from a year earlier, driven by a spike in theft and scams.

DeFi is a rapidly growing sector of the crypto market that aims to cut out middlemen, such as banks, from traditional financial transactions, like securing a loan, by using blockchain technology.

For more survey results, what they mean and how to prevent becoming a victim, NASAA NASAA Reveals Top Investor Threats for 2022 -/?qoid=current-headlines.