The Realm of Possibility: How Social Media Feeds Crypto Fraud

Welcome to the June 2022 edition of our newsletter!  In this issue, we’ll examine frauds centering around cryptocurrencies, and how social media is used to proliferate such scams.

Social Media and Unproven Fintech Create Perfect Fraud Storm

Social networks, especially those focused on professional experience, are inherently built on trust.  Trust, of course, is what fraudsters feed on to exploit their marks.  As cryptocurrency investing has erupted in scope in the last few years, these two relatively new trends have converged to create a dangerous combination.

Platforms such as LinkedIn provide a certain veneer of credibility to their users, or at least the appearance of credibility.  But fraudsters have begun creating fake profiles on that service to reel in victims, first by making chit chat about a shared interest or supposed past employer, and then pitching dubious cryptocurrency ideas once a level of trust has been established.  In other instances, a fraudster may pose as an investment adviser and try to convince the victim to “invest” their savings, in a plot very much like a Ponzi scheme where “returns” are experienced at the outset, and then silence as funds are drained.

Due diligence before taking such risks is the best way to proceed.  For those claiming to be investment advisers, checking of self-regulatory records like FINRA is critical, as is a review of any litigation and other reputational risks.  If someone reaches out who claims to be in the same field, or to have attended the same school as a client, verifying such claims is key to determining their credibility, or lack thereof.  Finally, the potential investment should be thoroughly vetted, especially if it’s something which is relatively new, such as SPAC or a new cryptocurrency.