US SEC Issues Fresh Investor Alert Against Fraudulent Digital Asset Trading Sites

The United States Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have jointly issued an alert warning investors against fraudulent websites purporting to operate advisory and trading businesses.

The alert, issued by the SEC’s Office of Investor Education and Advocacy and the CFTC’s Office of Customer Education and Outreach, was published on April 24.

The warning states that staff from both agencies have recently observed crypto-related investment scams where bad actors are touting “digital asset or ‘cryptocurrency’ advisory and trading businesses,” in some cases claiming they can invest clients’ funds in special crypto trading systems or purported mining farms.

Such fraudsters often claim their schemes can guarantee lucrative returns — e.g. 20-50% — and will court little to no risk for customers. In a bid to protect investors, both agencies have summarized six red flag signals that often characterize fraudulent operations, and urged investors to closely scrutinize crypto-related investment offers.

While guarantee returns and risk-free investment represents one such suspicious characteristic, the text notes that scams may also use complex jargon and opaque or confusing language to disorient investors and conceal inconsistencies.

Moreover, the agencies urge investors to consult with scheme operators’ license and registration status on the Investor.gov site, warning against participating in an investment scheme that is unregistered or unlicensed.

Another warning sign is an investment scheme touted through an unsolicited sales pitch from an unknown seller, with the agencies cautioning that fraudsters often use fake names and misleading photos, and may provide U.S. contact numbers despite operating from overseas.

Lastly, the alert notes that both a “too good to be true” appearance and “Pressure to buy RIGHT NOW” can be a tip that the investment scheme is dubious.

As reported earlier today, the agencies joint alert comes following the 13-count indictment of two men for allegedly operating a scam bitcoin (BTC) investment scheme which promised zero-risk returns of as high as 50%.

In spring 2018, the SEC created a mock initial coin offering site using such red flag characteristics as part of its investor awareness efforts. Those who attempted to purchase the ersatz tokens were redirected to an educationally-oriented page on the SEC’s own site.