The United States Securities and Exchange Commission (SEC) has issued an investor alert to warn the public about the growing threat of fraudsters using cryptocurrencies and securities to deceive investors. Due to the increasing popularity of digital currencies, these scams have evolved into more elaborate forms, employing sophisticated technologies and social manipulation tactics.

SEC Warns of Crypto Asset Scams

The SEC's latest advisory emphasizes that investors should be especially cautious, as fraudsters are using the promise of cryptocurrencies to perpetrate their schemes. These scams typically involve the use of impersonation and concealment of identities, making it challenging for authorities to track the flow of funds and recover stolen assets.

Social media platforms and direct messages are notable avenues for these crypto scams, where fraudsters pretend to be familiar with the victim or provide unsolicited investment tips. These scammers often groom their targets before asking them to invest in fake securities projects, only to vanish after collecting large sums of money.

Tactics Employed by Scammers

Scammers have also been observed taking advantage of emerging technologies such as artificial intelligence (AI) to lure investors. They set up fake websites and use deepfake technology to generate fake sound and video clips featuring celebrities or well-known officials, giving the scams a false endorsement.

Furthermore, the SEC has noted that pump and dump fraud is on the rise, especially in the context of low-quality or speculative coins such as memecoins, through which investors can lose a lot of money.

The SEC also warns investors about demands for extra payments for the unlocking or recovery of their investment accounts, which are often accompanied by promises of tax payments, fees, or regulatory issues, which are merely attempts by scammers to extract more money from victims.

Preventive Measures and Legal Actions

The SEC encourages anyone interested in investing to conduct thorough research and consult accurate information, especially when investing in crypto assets. This includes checking the identity of the people or companies offering the investment opportunity and the accuracy of their claims on potential returns.

The SEC and other regulatory agencies remain active in seeking legal redress against the perpetrators of these scams. They are also conducting awareness campaigns to educate the public about the dangers of investing in crypto assets and the red flags of scams.

These warnings come in the backdrop of recent enforcement actions and criminal charges. The U.S. Department of Justice (DOJ) recently filed charges against two Chinese citizens in a $73 million crypto scam, highlighting the international and complex nature of such frauds. Additionally, the crypto space has experienced a new wave of hacks linked to Pendle yield tokens, with more than $10 million lost due to these attacks.