The U.S. Securities and Exchange Commission’s (SEC) Office of Investor Education and Advocacy has issued a warning to investors about the growing threat of cryptocurrency scams. The alert highlights how fraudsters are leveraging the popularity of cryptocurrencies with sophisticated techniques, making it difficult for victims to recover their funds. The SEC’s advisory stresses:
“Fraudsters use a variety of techniques to convince investors to hand over their hard-earned money.”
Five Common Crypto Scam Tactics
The SEC’s alert details five prevalent tactics used by fraudsters:
- Social Engineering Scams:
- Fraudsters build trust via social media or accidental text messages, pretending to be acquaintances.
- They quickly move conversations off the initial platform to establish relationships.
- They propose lucrative crypto investment opportunities, using fake websites to show phony profits and allow small withdrawals to build trust before soliciting larger sums, which then become inaccessible.
- Exploiting Emerging Technologies:
- Scammers exploit the hype around technologies like artificial intelligence (AI), using AI-related buzzwords and high-return claims to attract investments.
- AI technology is also used to create realistic websites, marketing materials, and deepfake content imitating celebrities or trusted individuals to gain confidence.
- Impersonation of Trusted Sources:
- Fraudsters impersonate trusted sources, including government agencies like the SEC, using AI technology and hacked social media accounts.
- They send messages that appear to come from friends or family, promoting fraudulent investment opportunities.
- Pump-and-Dump Schemes:
- Fraudsters conduct pump-and-dump schemes with crypto assets, including so-called ‘memecoins’ that reference popular culture or internet memes.
- They create a memecoin, promote it on social media to inflate its price, and then sell off their holdings at a profit before the hype ends, leaving other investors with significant losses.
- Advance Fee Fraud:
- Scammers demand additional payments for withdrawals, claiming accounts are frozen, under investigation, or requesting repayments for mistaken deposits.
- They also target previous victims, promising to help recover lost assets for additional payments or access to private keys, leading to further losses.
SEC’s Advice for Investors
The SEC advises investors to avoid making decisions based on unsolicited contacts or social media recommendations. It’s crucial to independently verify any investment claims and exercise caution, especially with investments requiring payment via crypto assets. By staying informed and vigilant, investors can better protect themselves from these common crypto scams.
