ChainCatcher News: The U.S. Securities and Exchange Commission's Office of Investor Education and Advocacy has issued a warning, highlighting five common cryptocurrency scams that investors should be wary of to avoid losses. The SEC warned that fraudsters are taking advantage of the popularity of cryptocurrencies and using complex technology to make it difficult to recover funds.

First, scammers build trust through social media or unexpected text messages, pretending to be an acquaintance. They quickly move the conversation away from the initial platform, build a relationship, and present a lucrative cryptocurrency investment opportunity. They create legitimate-looking but fake websites that show fake profits and allow small withdrawals to build trust before demanding large sums that are then unavailable.

Second, scammers take advantage of the hype around emerging technologies such as artificial intelligence (AI). They use AI-related buzzwords and promise high returns to attract investment. AI technology is also used to create realistic websites, marketing materials, and deepfakes that mimic celebrities or trusted individuals to gain trust.

Third, scammers impersonate trusted sources, including government agencies such as the U.S. Securities and Exchange Commission (SEC). They use AI technology and hacked social media accounts to send messages that appear to be from friends or family, promoting fraudulent investment opportunities. Even if the promotion appears to come from a well-known person, it may be a scam.

Fourth, the SEC warns that fraudsters may use crypto assets to conduct pump-and-dump scams, including so-called “memecoins” that refer to pop culture or internet memes. “For example, scammers may create a memecoin and then hype it up on social media — sometimes they call it a ‘presale’ — to get others to buy it and ‘pump up’ or increase its price. The promoters or others they work with then ‘dump’ or sell it before the hype ends, profiting from the inflated price,” the securities regulator noted. “Typically, after the promoters sell and profit, the price quickly drops, and others who bought the tokens lose most of their money.”

Finally, scammers ask for additional fees for withdrawals, which is known as advance fee fraud. They may claim that the account is frozen or under investigation, or demand repayment of an alleged erroneous deposit. Scammers also target previous victims, promising to help recover lost assets, asking for additional fees or access to private keys, leading to further losses. Finally, the SEC advises investors to avoid making decisions influenced by unsolicited contacts or social media recommendations, emphasizes the need to independently verify any claims, and be cautious about investments that require payment in crypto assets.