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Crypto scams are the top investor threat 'by far' - NASAA

Kitco News

(Kitco News) The number one investor pitfall is falling for crypto scams, according to the latest data published by the North American Securities Administrators Association (NASAA).

"By far, NASAA's securities regulators revealed that investments related to cryptocurrencies and digital assets are our top investor threat," said Enforcement Section committee co-chair Joseph P. Borg, Alabama Securities Commission Director. "Stories of 'crypto millionaires' attracted some investors to try their hand at investing in cryptocurrencies or crypto-related investments this year, and with them, many stories of those who bet big and lost big began appearing, and they will continue to appear in 2022."

The data was published in the annual survey of North American securities regulators.

NASAA is calling on investors to use caution when looking for opportunities to make money, advising people that nothing can be risk-free.

"The most common telltale sign of an investment scam is an offer of guaranteed high returns with no risk. It is important for investors to understand what they are investing in and with whom they are investing," said Melanie Senter Lubin, NASAA president and Maryland Securities Commissioner. "Education and information are an investor's best defense against investment fraud."

Private offerings are a popular way to scam investors because many don't have to be registered with relevant authorities, the data showed.

"Unregistered private offerings generally are high-risk investments and don't have the same investor protection requirements as those sold through public markets," Borg said.

Regulations around digital assets are still being developed, which leaves investors unprotected.

"Before you jump into the crypto craze, be mindful that cryptocurrencies and related financial products may be nothing more than public facing fronts for Ponzi schemes and other frauds," said Enforcement Section Committee Vice-Chair Joseph Rotunda, Texas State Securities Board Enforcement Division Director. "Investments in cryptocurrency trading programs, interests in crypto mining pools, crypto depository accounts and securitized tokens should be seen for what they are: extremely risky speculation with a high risk of loss."

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Cryptocurrency-related crime reached a record level in 2021, with $14 billion in digital currencies stolen worldwide in scams, according to a report published by blockchain analytics firm Chainalysis. 

"Criminal abuse of cryptocurrency creates huge impediments for continued adoption, heightens the likelihood of restrictions being imposed by governments, and worst of all victimizes innocent people around the world," said Chainalysis.

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