The Office of Investor Education and Advocacy of the U.S. Securities and Exchange Commission (SEC) issued a warning stating that scammers continue to use crypto assets to defraud retail investors and that despite increasing enforcement by federal and state regulators, recovering defrauded funds remains difficult. Scammers can hide their identity or the flow of funds, and even quickly transfer funds abroad.

SEC warns of five major crypto scams

SEC Tweet Warns Crypto Scam Tactics 1. Social Media Connection and Trust Building

Scammers may contact potential victims through social media platforms or text messages and quickly move communication to other platforms to establish a relationship of trust and even develop into a friendship or romantic relationship, thereby inducing the victim to invest. This type of trust fraud is often referred to as a "pig slaughter scam."

Scammers will pretend to know about lucrative investment opportunities and guide victims to use legitimate-looking websites or apps to conduct transactions. In the early stages, they may allow victims to withdraw a small amount of "profit" to further gain trust. In the end, victims often cannot recover it. Investment or so-called "profit".

(The United States was defrauded of 2.6 billion magnesium a year! Transnational pig-killing scam: Chinese businessmen are connected to Southeast Asia’s cryptocurrency financial flow network)

2. Request additional fees to withdraw funds

Following on from the above, scammers will ask investors to pay additional fees, fees or taxes to withdraw funds, for example by pretending that the account has been frozen or under investigation and demanding a large fee to unfreeze the account.

If investors pay, they usually will not get back their initial investment and will lose more money.

3. Capitalize on the artificial intelligence (AI) boom

Scammers may be taking advantage of the AI ​​craze to lure investors into crypto-related investments. This includes using buzzwords related to AI and claiming to be able to find the best investment opportunities through AI technology, but in fact it is just to defraud funds.

Scammers may even use AI technology to create realistic websites or promotional materials, or use deepfake content, including images of celebrities, government officials, or family and friends, to further deceive investors.

4. Disguise or use trusted sources

Scammers may impersonate or use the names of official agencies, organizations and individuals to defraud, including impersonating the identity of the SEC. Investors should verify the authenticity of communications purporting to be from the SEC when they receive them.

5. Manipulating crypto asset prices

Scammers may manipulate crypto asset prices, particularly so-called “meme coins,” through “pump and dump” strategies. By promoting these currencies on social platforms, investors are attracted to buy in large quantities, push up the prices and then quickly sell them for profit, causing prices to plummet and investors to suffer huge losses. Investors should not make investment decisions based solely on information on social media.

(Idiot Evolution Theory｜Meme coins have become the mainstream of the market, replacing NFT and becoming a popular entry point for the public)

Crypto community criticizes SEC

In fact, the five cases proposed by the SEC are indeed hot spots for fraud and even appear frequently in Taiwanese social news. However, the crypto community does not accept the case and still criticizes the SEC for its inaction.

The community pointed out multiple accusations below the SEC’s tweet:

  • The real scammers are traditional hedge funds, market makers, and banks.

  • It would be nice if the SEC could be more precise about what are securities so we don't get scammed.

  • The scams cited by the SEC are as bad as the Treasury Department printing billions of dollars out of thin air.

The SEC once again emphasized at the end of the article that investors should avoid hasty actions due to FOMO when faced with investment opportunities that appear to be “cutting edge”. Especially when it comes to crypto-related investments, they need to be wary of warnings such as the above-mentioned fraud techniques and make decisions with caution. Investment decision.

This article SEC warns about five major crypto fraud techniques, and the community criticized regulatory inaction. It first appeared on Chain News ABMedia.