Crypto scams are ‘flavor of the year’ for scammers, SEC official says


Financial fraud is as old as time, but the explosion of investor interest in cryptocurrencies in recent times has made digital assets a go-to tool for bad actors.

Scams involving crypto have become the “flavor of the year” in the financial fraud world, Peter Diskin, deputy regional director in the Atlanta office of the United States Securities and Exchange Commissions, said at a virtual event on consumer fraud trends on Wednesday.

“We see this all the time – that any popular topic becomes a way for scammers to get people’s attention,” he said. “They say it’s something new and profitable,” while playing on people’s fear of missing out on the next big thing.

Cryptocurrency fraud complaints have grown exponentially in recent months, according to the Federal Trade Commission. Between October 2020 and May 2021, over 7,000 people reported digital asset scams to the FTC with a median loss of $ 1,900, a twelve-fold increase in complaints and a 100-fold increase in loss median reported over the same time period. one year earlier.

Because cryptocurrency enthusiasts tend to congregate online to discuss the topic, and as cryptocurrencies have skyrocketed, crooks can “step onto the scene with claims that may seem plausible because crypto – Currency is uncharted territory for many people, ”wrote Emma Fletcher, program analyst. to the FTC in a recent report.

Diskin noted that the online nature of digital assets is more dangerous than traditional scams implemented in person or over the phone, as international criminals can more easily prey on unsuspecting Americans on the internet.

“It’s not uncommon for money to be able to be withdrawn from US bank accounts and go overseas, making it even more difficult to recover if something goes wrong,” he said.

Diskin pointed to a recent case in which the SEC accused a company called Blockchain Credit Partners of selling a new cryptocurrency, telling victims the proceeds would be used to buy auto loans that would generate healthy returns. In fact, the scam operators used the proceeds for personal use or to reimburse other investors.

“This is a very common framework and techniques,” said Diskin, although the technology and marketing campaigns aimed at perpetrating the fraud have used new technologies and new terminology.

Diskin also cautioned against trusting celebrities who promote digital assets, as several recent cases show they are not always candid about being paid for an endorsement, in violation of the law. . He highlighted recent actions by the SEC to fine boxer Floyd Merriweather, musician DJ Khalid and actor Steven segal for the promotion of digital assets without disclosing their remuneration.

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