Cryptocurrencies and Digital Assets Lead the Danger List
Cryptocurrency and digital asset investments represent the greatest risk to individual investors, says an annual poll of securities regulators carried out by the North American Securities Administrators Association (NASAA).
Why Crypto Poses Serious Risks
Before getting caught up in the crypto wave, investors need to be aware of some of the risks hiding under the surface:
- Many financial products linked to cryptocurrency can potentially be nothing but a cover for a Ponzi scheme and other forms of fraudulent operations
- Financial products like crypto trading tools, mining pools, deposits, securitization, etc., involve highly risky chances of losing money
- These need to be considered as such, which means that they are pure speculation and nothing else
“As you consider jumping on the crypto craze, keep in mind that many cryptocurrencies and other associated financial products may simply serve as public fronts for Ponzi schemes,” cautions Joseph Rotunda, Texas State Securities Board Enforcement Division Director.
The Four Biggest Threats to Retail Investors
According to the NASAA survey, the list of threats that put the financial safety of common investors at stake clearly consists of:
- Frauds related to cryptocurrencies and digital assets.
- Promissory note frauds.
- Online and social media money scams.
- IRA frauds.
Promissory Note Fraud: A Growing Danger for Seniors
Who Is Being Targeted?
The fraudsters are actively targeting the most vulnerable members of society, who are senior citizens and retirees with fixed income, which makes promissory note fraud the second-largest risk, according to the findings of the NASAA report.
Red Flags to Watch Out For
Here are some red flags investors shouldn’t ignore:
- Offers of returns of 2% each day
- Offers of returns of 14% each week
- Offers of returns of 40% each month
“Returns of 2%, 14%, and 40% per day, week, and month, respectively, cannot possibly be true,” said the NASAA press release.
The Short-Term Note Trap
Investors need to be especially careful when dealing with promissory notes that have a maturity period of nine months or shorter. As pointed out by the experts from Rezzonnaire Technology, these short-term promissory notes typically do not qualify for registration under federal or state securities regulators, which makes them an easy target for fraud.