Cryptocurrencies and digital assets will be the top investor threat in 2022, according to a top US non-profit organisation, and before you jump into the crypto craze, be aware that cryptocurrencies and related financial products may be nothing more than public-facing fronts for Ponzi schemes and other frauds.
Cryptocurrency scams are the number one top investor threat “by far,” according to a new report from the North American Securities Administrators Association (NASAA).
“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.
An offer of guaranteed high returns with no risk is the most common warning sign of an investment scam.
“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.
Because digital assets do not fit neatly into the existing investor regulatory framework, promoters of these products may find it easier to defraud the public.
All investments carry the risk that some or all of the funds invested will 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.
In 2021, cryptocurrency scammers stole $7.7 billion in cryptocurrency from victims, representing an 81% increase in losses over the previous year.
According to Chainalysis, nearly $1.1 billion of the $7.7 billion was attributed to a single scheme that allegedly targeted Russia and Ukraine.
In 2021, arug pulls’, in which the developers of a new cryptocurrency vanish and take their supporters’ funds with them, were a major source of rising cryptocurrency scams.