On January 10, 2022, the North American Securities Administrators Association (“NASAA”) announced its annual list of top investor threats for 2022. To no one’s surprise the 2022 list closely tracks the 2021 list, with the internet being the driving force behind the purchase of popular and volatile unregulated activity, including:
- investments tied to cryptocurrencies and digital assets;
- fraud offerings related to promissory notes;
- money scams offered through social media and internet investment offers; and
- financial schemes connected to Self-Directed Individual Retirement Accounts.
NASAA further indicated that digital assets “do not fall neatly in the existing investor framework and may be easier for promoters of these products to fleece the public.” NASAA representatives led by Joe Borg, Alabama Securities Director and Joseph Rotunda, Texas State Securities Board Enforcement Director, echoed concerns related to investments in cryptocurrencies or crypto-related investments.
“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,” said Rotunda.
NASAA representatives also urged investors to practice the following tips to identify and protect themselves from investment scams, including:
- Anyone can be anyone on the Internet. Scammers are spoofing websites and using fake social media accounts to obscure their identities. Investors should always take steps to identify phony accounts by looking closely at content, analyzing dates of inception and considering the quality of engagement.
- Beware of fake client reviews. Scammers often reference or publish positive, yet bogus testimonials purportedly drafted by satisfied customers. These testimonials create the appearance the promoter is reliable – he or she has already earned significant profits in the past, and new investors can reap the same financial benefits as prior investors. In many cases, though, the reviews are drafted not by a satisfied customer, but by the scammer.
- If it sounds too good to be true, it probably is. Bad actors often entice new investors by promising the payment of safe, lucrative, guaranteed returns over relatively short terms – sometimes measured in hours or days instead of months or years.
Oyster’s consultants include former senior regulators and compliance professionals with unique insight into how these issues can impact firms and advisors, including the potential for undisclosed outside business activity. Sadly, seniors and other vulnerable investors are often the target for these types of investment scams. Oyster can work with your firm to ensure proper policies, procedures and training are in place to guard against these risks.