SEC Warns of Crypto-Linked Love Scams

Federal officials are sounding the alarm on the rising threat of crypto scams tied to fake relationships on social media, dating apps, and networking platforms.

Gurbir S. Grewal of the US Securities and Exchange Commission (SEC) highlights the growing danger of these "relationship investment scams," which are proving particularly harmful to retail investors.

Scammers often pose as romantic interests or reconnect as old acquaintances, gradually gaining trust before introducing fraudulent crypto investment schemes, leading to significant financial losses for victims.

Rise of Crypto-Linked Romance Fraud

The SEC is urging investors to scrutinise their information sources and verify them during World Investor Week (WIW) 2024, running from 7 to 13 October, as per their release.

Whether seeking an investment professional or evaluating which investments align with their financial goals, the SEC emphasizes the importance of relying on trusted sources.

In 2023, the FBI received nearly 70,000 complaints of crypto-related financial fraud, with $3.96 billion lost to investment scams alone.

Many scammers target victims by building trust through social media or dating apps over extended periods before proposing fraudulent investments.

Now in its eighth year, WIW aims to promote investor protection and awareness, with the SEC collaborating with the Commodity Futures Trading Commission, FINRA, and other global regulators to equip investors with crucial knowledge.

US SEC chair Gary Gensler stated:

“Investor protection is at the very core of the SEC's three-part mission.”

2023 Saw $5.6B Crypto-Related Scams

Lori Schock, Director of the SEC's Office of Investor Education and Advocacy, highlighted the challenges investors face amid the rise of emerging technologies like AI, social media influencers, and aggressive marketing tactics.

These elements can obscure sound decision-making for those seeking reliable financial support.

The FBI reports that criminals are increasingly exploiting digital currencies like Bitcoin (BTC) and Ethereum (ETH) for fraudulent schemes.

In 2023 alone, crypto-related scams resulted in $5.6 billion in losses, marking a 45% increase from the previous year.

Investment fraud accounted for 71% of these losses, with relationship scams emerging as the most prevalent form of deception.

Criminals are drawn to crypto's decentralised nature, fast and irreversible transactions, and global reach.

The integration of AI is expected to further complicate the detection of these romance scams tied to cryptocurrency.