Home / Markets / Cryptocurrency /  Investing in crypto? Look out for these red flags of frauds, recommends US SEC

With investment in cryptocurrency becoming a rage with time, the US Securities and Exchange Commission (SEC) recently issued a fresh investor alert against investment scams related to digital assets and cryptocurrency. 

“Digital assets" include crypto-currencies, coins, and tokens such as those offered in so-called initial coin offerings (ICOs).

SEC, in its latest alert, highlights, “Fraudsters continue to exploit the rising popularity of digital assets to lure retail investors into scams, often leading to devastating losses."

It also stated, “Investors may be less skeptical of investment opportunities that involve something new or ‘cutting-edge,’ or may get caught up in the fear of missing out (FOMO)."

This, in order to help investors stay in the clear, the SEC suggests digital asset investors understand and evaluate the risks in addition to looking out for warning signs for a possible scam.

When considering an investment opportunity, SEC recommends to be cautious if you spot any of these red flags of fraud:

- “Guaranteed" high investment returns: Promises of high investment returns with little or no risk are a classic warning sign of fraud. Fraudsters may post fabricated historical returns on their websites showing high investment returns.

-Unlicensed/unregistered sellers: Unlicensed, unregistered sellers commit much of the securities fraud targeting retail investors in the U.S. Check out the background (including license and registration status) of anyone offering you an investment in securities using the search tool on

-Skyrocketing account values: Depictions of investment accounts rapidly increasing in value and providing large returns are often fake. This is a tactic fraudsters use to entice investors with the prospect of great wealth.

-Sounds too good to be true: If an investment “opportunity" sounds too good to be true, it probably is. Remember that the potential for high investment returns usually involves high risk.

-Fake Testimonials: Also, never rely solely on testimonials in making an investment decision. Fraudsters sometimes pay people – for example, actors to pose as ordinary people turned millionaires, social media influencers, and celebrities – to tout an investment on social media or in a video.

The SEC’s Office of Investor Education and Advocacy (OIEA) and Division of Enforcement’s Retail Strategy Task Force (RSTF) also suggested investors to verify that the individuals and firms offering an investment in securities are licensed/registered using the search tool on before handing over their money to them. 

Before you hand over your money, verify that the individuals and firms offering an investment in securities are licensed/registered using the search tool on 

The SEC also highlighted BitConnect’s $2-billion scam that resulted in huge losses for the retail investors. “The platform allegedly paid investor withdrawals out of incoming investor funds and did not trade investors’ Bitcoin consistent with its representations, leading the platform to collapse and investors to lose massive amounts of money," the alert stated.

Meanwhile, a selloff in cryptocurrencies widened on Tuesday, with bitcoin weakening nearly 4% while smaller rival ether fell more than 6%.

The world's biggest and best-known cryptocurrency weakened 4% to $50,516, having risen to a mid-May high above $52,000 earlier, in Asian trading.

Ether, the coin linked to the ethereum blockchain network, fell more than 6% to $3,666.


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