As fraudsters continue to lure investors with crypto scams, the SEC’s Office of Investor Education and Advocacy has issued a list of five things to watch for.
1. Using Social Media
Fraudsters may initiate contact on social media platforms or through unsolicited text messages, claiming to be an old friend or to have contacted you by accident. They may move communications to another platform and initiate a friendship or romantic relationship. They may promote crypto asset investments and claim to have insider information.
They may direct you to a legitimate-looking — but fake — website or to a widely used app. They may make it look like you have profited and allow you to withdraw a small amount, further gaining trust. They then may ask you to make a larger investment. Often, there is no way to recover your investment or any “profits.” Paying more only increases the loss.
They may direct you to get Bitcoin at a Bitcoin ATM or kiosk or through a crypto platform to make investment deposits and then tell you where to send it. An investment may be fake if you must pay with crypto. Do not give them any information about your personal finances or identity.
2. Exploiting Hype Around Emerging Tech
Fraudsters may use the popularity of new tech like artificial intelligence as a lure for investments related to crypto asset securities. They may use AI-related buzzwords and say they deploy AI bots to find the best crypto asset-related investments. They also may use AI to produce realistic looking websites or ads to promote investment scams or to create “deepfakes” — fake voices, images.
Fraudsters may use communications — including phone calls, voicemails, text messages, messages via social media, emails, letters and certificates — that appear to be from official U.S. government sources, including the SEC. If you receive such a communication, verify that you are dealing with a real government official before providing any personal information. AI makes it easier for fraudsters to impersonate government agencies, organizations, and individuals using deepfakes. They may hack social media accounts of friends or family members and send messages pretending to be from them. Even if a friend or family member makes an investment pitch, they may have been fooled by a scam. Fraudsters sometimes recruit unwitting community leaders to pitch a fake investment.
4. Memecoin Pump and Dump
Beware of pump-and-dump schemes with crypto assets, including so-called “memecoins” that reference pop culture or internet memes. Fraudsters may create a memecoin and then tout it on social media to get others to buy and “pump” up, or increase, its price. Then they or others working with them “dump,” or sell, profiting from the pumped-up price. The price then quickly falls, and other investors lose money.
5. Demanding Additional Payments
Investment scammers may use advance fee fraud, demanding that you pay additional costs, fees, or taxes to withdraw money from your account. They may tell you a regulator is investigating and has frozen your account. They may ask you to pay a large deposit, fee, or sum of taxes to unfreeze your account. If you pay, you are unlikely to receive your initial investment and will also lose the additional payment.
They may falsely say they “mistakenly” deposited money into your account and ask you to refund the money. Fraudsters also may target you if you already have lost money or crypto assets due to bankruptcy or a scam. They may ask you to send them the private key to access your crypto assets, or to put in additional money or crypto assets, offering to “help” you recover what you lost.
Don’t get caught up in the fear of missing out (FOMO) on a purported investment opportunity that seems new or “cutting-edge,” the SEC concludes.
