North American Securities Regulator: Cryptocurrency scams are the biggest threat to investors right now

Time:2022-01-11 Source: 671 views Trending Copy share

In the morning news on January 12, it is reported that the latest data from the North American Securities Administrators Association (NASAA) shows that investments related to cryptocurrencies and digital assets are “by far” the biggest threat to investors.

“This year, the 'crypto millionaire' stories that have attracted some investors to try investing in cryptocurrencies or crypto-related investments, and as these scenarios unfold, many bet big and lose big, these stories will be in 2022 Keep showing up," said Joseph P. Borg, director of the Alabama Securities Commission and co-chair of the Enforcement Sector Commission.

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

"The most common sign of an investment scam is a guaranteed high risk-free return. It's important for investors to understand what they're investing in and with whom," said Maryland Securities Commissioner Mailer, president of the North American Securities Administrators Association. Melanie Senter Lubin said.

"Education and information are investors' best defenses against investment fraud," Lubin continued.

The report also stated that digital assets “do not comply with existing investor regulatory frameworks,” so it may be easier for promoters of these investment products to “deceive the public.”

"Before you get into the cryptocurrency investment craze, be careful that cryptocurrencies and related financial products may just be Ponzi schemes and other frauds to the public," said Joseph Rotunda, vice chairman of the Enforcement Sector Committee.

Investing in cryptocurrency trading programs, interest in crypto mining pools, crypto depository accounts and securitized tokens should “see what they are for: extremely risky speculation and high risk of loss,” Rotunda added.

Scammers have made a record $14 billion in cryptocurrencies in 2021, thanks in large part to the rise of decentralized finance (DeFi) platforms, according to blockchain analytics firm Chainalysis.

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

The surge in theft and scams led to a 79% year-over-year increase in cryptocurrency-related crime losses.

Fraud is the most dominant form of cryptocurrency crime in 2021, followed by theft – with most cases occurring through hacking of cryptocurrency businesses. DeFi is an important part of scams and thefts, Chainalysis said, another warning for newcomers to this nascent space.

The North American Securities Administrators Association noted that many of the fraud threats facing investors today involve private equity, which is not subject to registration requirements under federal law. U.S. states also have preemptive rights to enforce investor protection laws related to these private securities.

"Unregistered private equity is generally a high-risk investment product and does not have the same investor protection requirements as private equity sold on the public market," Bogle said.

In the end, state securities regulators say that if everything sounds too good to be true, it probably isn't.

For example, some DeFi platforms offer users high returns, such as savings and loan products with high interest rates.

Scammers often lure new investors by promising safe, profitable, guaranteed returns over a relatively short period of time — "sometimes measured in hours or days, not months or years," North American Securities Such promises are a red flag for fraud, the management association said.

Fraudulent products related to promissory notes, money scams online and on social media, and financial schemes related to individual retirement accounts were among the biggest threats to retail investors in the survey.

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