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- Celebrity endorsements of digital assets are becoming more popular in scams
- Fraudsters use attractive industries like cryptocurrency to attract victims, according to Peter Diskin, an assistant regional director at the SEC’s Atlanta office
- Nearly 7,000 victims have reported cumulative losses of more than $80 million to the Federal Trade Commission as a result of crypto scams in recent months
Financial fraud has existed since the dawn of humanity, but the recent surge in investor interest in cryptocurrencies has made digital assets a preferred tool for criminals. At a virtual event on consumer fraud trends on Wednesday, Peter Diskin, assistant regional director at the US Securities and Exchange Commission’s Atlanta office, claimed that scams utilizing cryptocurrency have become the flavour of the year in the financial crime sector.
Complaints regarding crypto frauds have increased in the recent months
They see it all the time, he added, where whatever is a hot topic becomes a vehicle for con artists to capture people’s attention. They claim that this is something new and profitable, all the while preying on people’s fears of losing out on the next big thing. According to the Federal Trade Commission, complaints concerning cryptocurrency fraud have increased dramatically in recent months. More than 7,000 consumers reported scams involving digital assets to the FTC between October 2020 and May 2021, with a median loss of $1,900, a twelvefold increase in complaints, and a 100-fold increase in the median reported loss compared to the same period a year ago.
In a recent report, Emma Fletcher, a program analyst at the Federal Trade Commission, wrote that because cryptocurrency enthusiasts tend to congregate online to discuss the topic, and as cryptocurrencies have risen in value, scammers are able to blend into the scene with claims that can seem plausible because cryptocurrency is unfamiliar territory for many people. Because international criminals may more readily prey on gullible Americans on the internet, Diskin believes that digital assets are more dangerous than traditional scams carried out in person or over the phone.
SEC has fined the celebrities for lying about the amount being received in crypto endorsements
Money is regularly taken out of US bank accounts and sent overseas, making it considerably more difficult to recover if something goes wrong, he said. Diskin cited a recent example in which the Securities and Exchange Commission prosecuted a company called Blockchain Credit Partners for selling a new cryptocurrency and telling victims that the cash would be used to buy vehicle loans with high returns. In actuality, the scammers used the money for personal expenses or to pay off other investors.
Although the technology and marketing strategies used to perpetrate the fraud used new technologies and vocabulary, Diskin stated this is a very familiar structure and approaches. Diskin also cautioned against putting faith in celebrities who promote digital assets, citing several recent examples in which celebrities have been caught lying about being paid for endorsements, in violation of the law. The SEC recently fined boxer Floyd Merriweather, artist DJ Khalid, and actor Steven Segal for promoting digital assets without declaring their income, he said.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
