Regulator says crypto scams are biggest threat to investors ‘by far’


Investments related to cryptocurrencies and digital assets are the biggest threat to investors ‘by far’ According to new data From the North American Association of Securities Administrators (NASAA).

“The ‘crypto millionaire’ story has attracted some investors this year to try investing in cryptocurrencies or crypto-related investments, and with them, many big-and-lost stories have begun to emerge and will continue to emerge in 2022,” Ala said. said Joseph P. Borg, co-chair of the Bama State Securities Commission’s Enforcement Section Committee.


The annual survey by North American securities regulators urges investors to exercise caution before buying popular and volatile unregulated investments, especially those involving cryptocurrencies and digital assets.

“The most common sign of an investment scam is offering a risk-free guarantee of high returns. It’s important for investors to understand what they’re investing in and who they’re investing in,” said Melanie Senter Lubin, president of NASAA and the Maryland SEC.


“Education and information are investors’ best defenses against investment fraud,” Lubin continued.

The report added that digital assets “have not fully fallen into the existing regulatory framework for investors,” so promoters of these products may be more likely to “deceive the public.”

“Before you get into the crypto craze, be aware that cryptocurrencies and related financial products may be little more than a public exposure to Ponzi schemes and other fraudulent practices,” said Joseph Rotunda, vice chairman of the Enforcement Section Committee.


Investments in cryptocurrency trading projects, interest in crypto mining pools, crypto deposit accounts and securitization tokens should “see them for what they are: extremely risky speculation and high risk of loss,” Rotunda added.

Scammers brought back a record $14 billion in cryptocurrency in 2021, thanks in large part to the rise of decentralized finance (DeFi) platforms, According to blockchain analysis firm Chainalysis.

DeFi is a fast-growing area of ​​the crypto market that aims to remove middlemen such as banks from traditional financial transactions, such as obtaining loans, by using blockchain technology.


Crypto-related crime losses are up 79 percent from a year ago, driven by a surge in theft and scams.

Fraud is the largest form of cryptocurrency-based crime in 2021, followed by theft — most of which occurs through hacking of cryptocurrency businesses. DeFi is a big part of the story on both sides, Chainalysis said, another warning for those dabbling in this nascent sector of the crypto industry.

NASAA noted that many of the fraud threats facing investors today involve private placements that are not subject to registration requirements under federal law. States are also prohibited from enforcing investor protection laws related to these private securities.

“Unregistered private offerings are generally high-risk investments and do not have the same investor protection requirements as offerings sold through the public market,” Bogle said.

Ultimately, the state securities regulator said, if that sounds too good to be true, it probably is.

For example, some DeFi platforms, Offer great returns to users, such as savings and borrowing products with high interest rates.

Bad actors often lure new investors by promising to pay out safe, profitable, guaranteed returns over relatively short terms – “sometimes measured in hours or days rather than months or years”, NASAA says such promises are a red flag for fraud.

Fraudulent products related to promissory notes, money scams offered online and through social media, and financial schemes related to self-directed IRAs also made the list of the survey’s top threats to retail investors.

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