The U.S. Securities and Exchange Commission (SEC) has issued a stark warning to investors about the growing threat of crypto scams, highlighting five prevalent tactics used by fraudsters to deceive unsuspecting victims. In an Investor Alert released by the SEC’s Office of Investor Education and Advocacy, investors are urged to exercise caution and vigilance to avoid falling victim to these scams, which often involve sophisticated techniques that make recovering stolen funds challenging.

The alert outlines the following five common tactics employed by fraudsters:

1. Social Media Impersonation: Fraudsters pose as acquaintances on social media or through text messages, quickly establishing rapport before enticing victims with lucrative investment opportunities.

2. Exploiting AI Hype: Scammers capitalize on the buzz surrounding emerging technologies like artificial intelligence (AI), using AI-related jargon and promises of high returns to lure investors.

3. Impersonating Trusted Sources: Fraudsters impersonate trusted entities, including government agencies like the SEC, to promote fraudulent investment schemes. They may also use hacked social media accounts to give their scams an air of legitimacy.

4. Pump-and-Dump Schemes: Scammers orchestrate pump-and-dump schemes with crypto assets, particularly so-called ‘memecoins’ based on popular culture or internet memes. They artificially inflate the price of these coins through hype on social media before selling off their holdings and causing the price to plummet, leaving investors with significant losses.

5. Advance Fee Fraud: Fraudsters demand additional payments for various reasons, such as unlocking frozen accounts or recovering lost assets. Victims are tricked into making further payments, only to suffer additional losses.

The SEC emphasizes the importance of exercising caution when approached with unsolicited investment opportunities, especially those received through social media channels. Investors are advised to independently verify any claims and be wary of investments that require payment via crypto assets. By staying vigilant and informed, investors can better protect themselves from falling prey to these sophisticated scams.