The North American Securities Administrators Association (NASAA) has reported a growing threat of investment fraud, particularly scams involving digital assets and social media platforms.
The rapid evolution of technology has provided fraudsters with new tools to exploit unsuspecting investors, leading to a surge in fraudulent activities.
As more individuals become involved in the digital asset space, the risk of falling prey to these scams grows.
State authorities in the U.S. have seen a notable rise in regulatory probes focusing on digital assets.
This increase is in response to growing concerns about the legitimacy of investments involving cryptocurrencies, staking schemes, and other emerging technologies.
According to NASAA, there was a significant 131% increase in investigations related to staking schemes last year compared to the previous year.
Key Takeaways
Investment fraud is on the rise, with digital scams targeting investors through social media and online platforms.
- There was a 131% increase in investigations related to staking schemes last year compared to the previous year, according to NASAA.
- Regulators are increasingly facing risks from two types of scams: those targeting specific groups (such as elderly investors) and those centered on cryptocurrency.
- State regulators have taken action, conducting nearly 9,000 investigations and initiating over 1,180 enforcement actions in response to growing concerns about investment fraud.
Rising threats to retail investors
NASAA’s report reveals a growing risk for retail investors, particularly those interested in digital currencies and online investments.
As Leslie Van Buskirk, a securities regulator, emphasized, fraudsters are capitalizing on the public’s interest in new technologies, using this enthusiasm as a way to deceive individuals.
Many of these perpetrators create elaborate schemes, promising high returns on cryptocurrency investments while hiding the real risk behind their offerings.
Among the most common scams reported are those related to cryptocurrency-based schemes.
These scams often target a wide range of investors, from novices to seasoned individuals, who are lured into fraudulent offers due to promises of quick and substantial profits.
Beware of individuals claiming to be “registered” cryptocurrency traders. North American regulators do not register professional crypto traders. Learn more about these scams and protect your finances in our latest investor alert: https://t.co/Jak6yEjZnO #WIW2024 pic.twitter.com/rOsX7eWBRr
— NASAA (@NASAA) October 11, 2024
The report warns that regulators are increasingly facing risks from two types of scams: those targeting specific groups (such as elderly investors) and those centered on cryptocurrency.
As these digital currencies grow in popularity, financial institutions have become more involved, resulting in the rise of sophisticated banking scams, particularly involving cryptocurrency transfers.
Financial institutions and banking scams
As financial institutions and banking systems become more interconnected, the complexity of scams grows. For instance, banking scams involving cryptocurrency transfers are on the rise.
Fraudsters often exploit the lack of familiarity many people have with the technicalities of digital transactions. As a result, individuals must protect themselves from financial exploitation.
In response to these growing risks, state regulators have taken action. According to NASAA’s 2023 findings, state securities regulators conducted nearly 9,000 investigations and initiated over 1,180 enforcement actions.
These efforts resulted in significant financial penalties, exceeding $333 million, and led to 461 years of imprisonment and 227 years of supervised release for those found guilty of perpetrating scams.
Romance scams and financial losses
Alongside investment fraud, romance scams have become an increasingly prevalent issue. The Seminole County Sheriff’s Office recently issued a warning about the growing threat posed by romance scam artists, who reportedly cost victims an astounding $700 million in 2022 alone.
These scammers often target individuals navigating online dating platforms, and building trust through virtual relationships before exploiting their victims financially.
In 2022 alone, the FBI says almost 20,000 Americans lost more than $700 million dollars to Romance Scammers. In this video, our experts talk about how these scams work, and how to avoid becoming a victim. pic.twitter.com/L2TPqRs3w0
— Seminole County S.O. (@SeminoleSO) October 22, 2024
After establishing a connection, they frequently fabricate stories, such as needing financial support to meet in person or introducing investment opportunities to build credibility.
Once trust is gained, victims may be persuaded to invest in fraudulent schemes, only to see their banking or credit cards drained.
The impact of romance scams extends beyond direct financial losses; many victims are tricked into sharing sensitive personal and financial information, leaving them vulnerable to identity theft.
Securing your identity and financials
Identity theft remains a prevalent threat in the digital age, with scammers frequently utilizing stolen identities or fabricating false personas to deceive their victims.
Implementing identity theft protection measures—such as using strong passwords and two-factor authentication—is crucial to safeguarding personal and financial information from online predators.
In addition, many banks and financial institutions offer fraud protection services. These tools can help monitor for unusual activities and alert you to any suspicious transactions.
Ensure you’re making full use of these services to prevent potential financial exploitation. Consistently monitoring your accounts and promptly reporting any anomalies can mitigate the risks of identity theft and fraud.
Banking institutions often offer tools to help monitor for fraud, and individuals should take full advantage of these services.
The role of regulators
State and federal regulators are actively working to combat financial crimes involving digital assets, social media, and other forms of online investment fraud.
NASAA has predicted a rise in affinity-based scams, which target specific groups of people, such as elderly investors, by exploiting shared community ties.
These scams often involve trusted figures in communities encouraging investments in fraudulent schemes, making them particularly dangerous.
In 2023, regulatory oversight in state securities led to an unprecedented number of probes—over 8,768. These investigations resulted in more than 1,180 enforcement actions, leading to severe financial penalties for perpetrators and long prison sentences.
The dedication of regulators to guarding investors from fraudulent schemes is stronger than ever, but individuals must still remain informed and vigilant.
Protecting older investors
Scammers often target older investors because of the wealth they have accumulated over their lifetimes and their unfamiliarity with newer financial technologies.
NASAA found that a substantial number of elderly investors fell victim to fraudulent activities, particularly those involving online platforms and digital currencies.
In response, regulators have made a concerted effort to educate older individuals about the risks associated with financial scams and provide them with resources to protect their assets.
Programs aimed at protecting older investors include workshops, informational campaigns, and collaboration with organizations dedicated to senior welfare.
These efforts help seniors identify and avoid common scams, such as fake investment opportunities or fraudulent online relationships.
Staying safe online
When meeting people online, especially through dating platforms, it is essential to be cautious. While the verification tools provided by these apps can offer some level of security, they are not entirely reliable.
Always conduct thorough research before making any financial commitments to someone you’ve only interacted with virtually.
Scammers often prey on the emotional vulnerabilities of their targets, leading to not only monetary losses but also emotional distress.
Avoid investing large sums or sharing personal financial details with anyone you’ve only met online to reduce scam risks.
Combating financial scams
Regulators, law enforcement agencies, and consumer protection organizations are working together to combat financial scams.
By educating the public on the latest financial threats, these groups hope to reduce the number of victims who fall prey to fraudulent schemes.
NASAA’s report highlights the importance of staying informed and taking proactive steps to protect oneself from emerging threats.
Adopting strong security measures and staying informed reduces the risk of falling victim to scams.
Implementing measures like two-factor authentication, regularly updating passwords, and thoroughly researching any investment opportunity before committing can go a long way in preserving your finances.
If you suspect a scammer has targeted you, immediately report the incident to local authorities, such as the Seminole County Sheriff’s Office, which has a dedicated line for reporting financial fraud.
