Investor Beware

State securities directors warn against crypto, digital investments

Steer clear of cryptocurrency and digital investments, comes the warning from investment officials from across the country.  Volatile and unregulated investments, often promising fabulous returns, should raise investors’ caution.

Each year the North American Securities Administrators Association — a group made up of top securities officials from every state, plus provincial and territorial officials, across the U.S., Canada and Mexico — issues an update on the riskiest investments being hawked to consumers.

“The most common telltale sign of an investment scam is an offer of guaranteed high returns with no risk. It is important for investors to understand what they are investing in and with whom they are investing,” said Melanie Senter Lubin, NASAA president and Maryland Securities commissioner. “Education and information are an investor’s best defense against investment fraud.”

Investment officials highlighted four specific concerns:

1. Investments tied to cryptocurrencies and digital assets,

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2. Fraud offerings related to promissory notes,

3. Money scams offered through social media and internet investment offers and,

4. Financial schemes connected to Self-Directed Individual Retirement Accounts.

Alabama’s chief securities regulator, Joseph Borg, also commented on behalf of NASAA.

“By far, NASAA’s securities regulators revealed that investments related to cryptocurrencies and digital assets is our top investor threat. Stories of ‘crypto millionaires’ attracted some investors to try their hand at investing in cryptocurrencies or crypto-related investments this year, and with them, many stories of those who bet big and lost big began appearing and they will continue to appear in 2022,” Borg said.

Noting that many of the fraud threats facing investors today involve private offerings, as federal law exempts these securities from registration requirements and preempts states from enforcing important investor protection laws, Borg added, “Unregistered private offerings generally are high-risk investments and don’t have the same investor protection requirements as those sold through public markets.” Borg is director of the Alabama Securities Commission and Enforcement Section Committee co-chair for the national association.

Texas’ chief securities officer, Joseph Rotunda, also warned, “Before you jump into the crypto craze, be mindful that cryptocurrencies and related financial products may be nothing more than public facing fronts for Ponzi schemes and other frauds. 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.”

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