Federal officials are warning investors of the increased risk of falling victim to cryptocurrency scams that involve fake relationships established over social media, dating apps, and networking sites. These scams occur when fraudsters use various platforms to pose as a romantic interest, old friend, investment professional, or acquaintance to gain the trust of their targets. They eventually persuade victims to invest in cryptocurrency, only to defraud them through fake investments.
The Securities and Exchange Commission (SEC) issued a statement emphasizing the rapid increase in relationship investment scams, including those involving cryptocurrencies, which pose a significant risk to retail investors. Last month, the SEC took enforcement actions against criminals who stole millions of dollars from investors through fraudulent schemes involving WhatsApp, LinkedIn, Instagram, and fake crypto asset trading platforms. These scams demonstrate the catastrophic harm that can occur as a result of falling victim to fraudulent investment schemes tied to cryptocurrencies.
The misuse of cryptocurrencies by criminals has grown, with consumers losing an estimated $5.6 billion from crypto-related scams in 2023, a 45% increase from the previous year. Investment scams accounted for a majority of these losses, highlighting the prevalence of fraudulent activities in the crypto space. One of the most prominent types of fraud last year was the relationship scam, where criminals use deception to trick individuals into investing significant amounts of money.
Crypto investment frauds are often long cons that involve criminals establishing relationships with victims over time before persuading them to invest in cryptocurrencies. Victims like Jules, who shared her experience on a FINRA podcast, were lured into investing by a romantic interest who provided false information to appear knowledgeable about crypto investments. Jules eventually took out personal loans to fund her investments, losing thousands of dollars in the process. These scams rely on building trust and gradually convincing victims to invest larger amounts of money.
To protect themselves from falling victim to crypto scams, investors should be cautious of investment advice or promotions received online from individuals they have not met in person. They should also be wary of domain names or websites that impersonate legitimate financial institutions, especially cryptocurrency exchanges. Additionally, investors should avoid downloading suspicious apps and be cautious of testimonials that claim unrealistic profits. It is important to verify the legitimacy of investment firms and be skeptical of any investments that sound too good to be true. By following these tips and verifying the registration of investment firms on platforms like BrokerCheck, investors can reduce their risk of falling victim to cryptocurrency scams.
