SEC: “never base investments on social media”

A couple of days ago, the U.S. Securities and Exchange Commission (SEC) issued an investor bulletin devoted specifically to social media and financial fraud. 

SEC draws attention to investments from fake news

The SEC is the U.S. government agency that oversees the stock market and is supposed to be in charge of investor protection. That is why it has a say in financial scams. 

The lengthy bulletin says that scammers often use social media of all places to defraud investors, so much so that the SEC’s Office of Investor Education and Advocacy encourages everyone to be skeptical and never make investment decisions based solely on information from social media.

Unfortunately, however, it also admits that investors are increasingly relying on these sources to draw on information regarding investments, so they are, in fact, increasingly exposed to possible scams. 

The SEC also admits that social media can provide benefits to investors, but at the same time it creates additional opportunities for scammers because it allows them to contact many people quickly, cheaply, and without much effort, in addition to the fact that it makes it easy to post information that looks real and credible. 

The bulletin also explicitly mentions cryptocurrency scams, saying that scammers can use social media to lure investors into a variety of schemes, including “crypto” investment scams.

Indeed, the bulletin devotes an entire paragraph to these scams. 

The weaknesses exploited by scammers

It states that scammers can exploit investors’ “Fear Of Missing Out” (FOMO) to convince investors on social media to buy tokens or cryptocurrencies. 

He also poses the question of how one can recognize a cryptocurrency scam, saying that one can proceed as one would with any other type of investment product. Specifically, “if it looks too good to be true, it probably is.” That is, if it gives the impression of being too interesting than the norm, it probably consists only of lies. 

They cite, for example, promises of high returns with little or no risk, which are classic signs of high scam danger. Scammers, in fact, may post completely made-up historical returns on their websites, or false depictions of investment accounts rising rapidly in value.  

The advice they give is simply what cryptocurrency experts have not tired of repeating for years, and generally called DYOR (Do Your Own Research).

In the bulletin they write:  

“If you are considering a “crypto” asset-related investment, take the time to understand how the investment works and look for warning signs that it may be a scam. Carefully review all materials and ask questions.”