SEC Warns Investors on Common Crypto Scams

In the latest Investor Alert, the SEC Office of Investor Education and Advocacy ("OIEA") described common tactics that fraudsters use to scam investors in crypto asset securities. 

The OIEA identified the following scams:

• Social Media: Fraudsters reach potential victims using social media platforms or through unsolicited text messages. The SEC advised investors not to make investment decisions based on the advice or solicitation of persons they may have met online or through an application, and to refrain from sharing any personal information, particularly including bank or brokerage account information.
• Artificial Intelligence ("AI"): Fraudsters lure investors with the prospect of investing in AI related crypto assets. Fraudsters may employ AI technologies to produce seemingly-legitimate websites, promotional material, and, even, "deepfakes" of trusted sources, such as celebrities, government officials, and even loved ones.
• Impersonation or Exploitation of Trusted Sources: Fraudsters generate communications that falsely appear to be sent from official US government sources, including the SEC. The SEC advised investors to refrain from providing any personal information until the source of the communication can be verified.
• Pump-and-Dump Schemes: Fraudsters use increasingly sophisticated "pump-and-dump" schemes to attract investors, most recently through the promotion of "memecoins," that are hyped through social media to pump up the price and then dumped. The SEC advised investors not to make investment decisions based solely on information acquired or learned from social media platforms or applications.
• Advance Fee Fraud: Fraudsters use methods to convince investors to pay additional costs, fees, or taxes and otherwise withdraw money from their accounts. Fraudsters attempt to convince victims to give access to assets offering to "help" recover losses related to bogus account problems.