SEC Warns of Top 5 Cryptocurrency Scams, Community Criticizes Regulators for Inaction

The Investor Education and Advocacy Office of the U.S. Securities and Exchange Commission (SEC) has issued a warning stating that scammers continue to exploit cryptocurrencies to deceive retail investors. Despite ongoing efforts by federal and state regulatory agencies to strengthen enforcement, recovering funds lost to scams remains challenging as scammers can conceal their identities or the flow of funds, and even quickly transfer funds overseas.

SEC Warns of Five Major Cryptocurrency Scam Tactics

1. Social Media Contact and Trust Building

Scammers may reach out to potential victims through social media platforms or text messages and quickly move communication to other platforms to build trust, even developing friendships or romantic relationships to lure victims into investments. This type of trust scam is often referred to as "pig butchering scams."

Scammers may pretend to know of lucrative investment opportunities and guide victims to trade on seemingly legitimate websites or applications, initially allowing victims to withdraw small amounts of "profits" to gain trust, but ultimately victims often cannot recover their investments or so-called "profits."

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2. Requesting Additional Fees to Withdraw Funds

Building on the previous point, scammers may ask investors to pay additional fees, charges, or taxes to withdraw funds, such as claiming the account is frozen or under investigation and requesting a large fee to unfreeze the account.

If investors make the payment, they often cannot retrieve their initial investment and end up losing more funds.

3. Exploiting the AI Craze

Scammers may leverage the AI trend to attract investors to participate in cryptocurrency-related investments. This includes using popular AI-related terms, claiming to find the best investment opportunities through AI technology, which is actually just a ploy to deceive for funds.

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

4. Impersonating or Using Trusted Sources

Scammers may impersonate or use the names of official agencies, organizations, and individuals for fraud, including falsely claiming to be the SEC. Investors should verify the authenticity of communications claiming to be from the SEC.

5. Manipulating Cryptocurrency Asset Prices

Scammers may manipulate cryptocurrency asset prices through tactics like "pump and dump," especially with so-called "meme coins." By promoting these coins on social platforms, they attract investors to buy in large quantities, drive up prices, quickly sell for profit, leading to a sharp price drop and significant losses for investors. Investors should not base investment decisions solely on information from social media.

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Crypto Community Criticizes SEC

While the five cases highlighted by the SEC are indeed hotbeds for scams, which frequently appear in Taiwanese social news, the crypto community remains critical of the SEC's inaction.

Under the SEC tweet, the community points out several accusations:

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

• If the SEC could more accurately identify what constitutes securities, it would prevent us from being scammed.

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

At the end of the article, the SEC emphasizes once again that when faced with seemingly "cutting-edge" investment opportunities, investors should avoid hasty actions driven by FOMO, especially when it comes to cryptocurrency-related investments, and should be cautious of the aforementioned scam tactics when making investment decisions.