Investors should be wary of crypto scams
Be mindful that cryptocurrencies and related financial products may be nothing more than public facing fronts for Ponzi schemes and other frauds, a top US non-profit organisation has warned
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New Delhi: CRYPTOCURRENCIES and digital assets will be the top investor threat in 2022 and before you jump into the crypto craze, be mindful that cryptocurrencies and related financial products may be nothing more than public facing fronts for Ponzi schemes and other frauds, a top US non-profit organisation has warned.
According to a new report from the North American Securities Administrators Association (NASAA), cryptocurrency scams are the number one top investor threat 'by far.'
'NASAA's securities regulators revealed that investments related to cryptocurrencies and digital assets is our top investor threat,' said Enforcement Section Committee Co-Chair Joseph P. Borg, Alabama Securities Commission Director.
'Stories of acrypto millionaires' attracted some investors to try their hand at investing in cryptocurrencies or crypto-related investments this year, and with them, many stories of those who bet big and lost big began appearing, and they will continue to appear in 2022,' he said in a statement.
The most common telltale sign of an investment scam is an offer of guaranteed high returns with no risk.
'It is important for investors to understand what they are investing in and with whom they are investing,' said Melanie Senter Lubin, NASAA President and Maryland Securities Commissioner.
Digital assets do not fall neatly into the existing investor regulatory framework, and it may be easier for the promoters of these products to fleece the public.
All investments carry the risk that some, or all, of the invested funds could be lost.
'Investments in cryptocurrency trading programs, interests in crypto mining pools, crypto depository accounts and securitised tokens should be seen for what they are: extremely risky speculation with a high risk of loss,' said Enforcement Section Committee Vice-Chair Joseph Rotunda.
Cryptocurrency scammers netted $7.7 billion worth of cryptocurrency from victims in 2021, an 81 per cent rise in losses compared to last year.
According to Blockchain analysis firm Chainalysis, nearly $1.1 billion of the $7.7 billion were attributed to a single scheme which allegedly targeted Russia and Ukraine.
A key source of rising cryptocurrency scams in 2021 were a 'rug pulls', where the developers of a new cryptocurrency vanish and take supporters' funds with them.
