How to Avoid Cryptocurrency-Related Stock Scams

Cryptocurrencies and other digital assets are often in the news. Unfortunately, the volatile and often opaque world of crypto makes it a fertile environment for crypto-related stock scams.

As is the case with micro-cap stock fraud, these scams are commonly promoted by unlicensed individuals touting the potential of high returns associated with crypto-related activities. The pitch often plays on emotions without providing important details such as business and financial fundamentals to back up such claims. It’s best to ignore and delete unsolicited communications—and hang up on cold callers.

Many stocks associated with pump-and-dump schemes tend to be quoted on an over-the-counter (OTC) quotation platform like the OTC Markets. OTC Markets provides compliance flags to quantify risk, including the buyer beware skull and crossbones to indicate the danger of questionable stock promotion or fraud.

Here are additional tips to keep from falling prey to a crypto-related stock scam.

• Purchase securities only from individuals who are registered and licensed to sell them. Use FINRA BrokerCheck to check the registration status of, and gain additional information about, the people and firms who tout these opportunities. Don’t send or transfer any funds until you’ve thoroughly verified the legitimacy of the seller.
• Don’t be swayed by predictions of unrealistic investment returns and other hype promoted through press releases, spam email, telemarketing calls, online posts or in social media threads. These actions may be signs of a classic pump-and-dump or pig butchering scheme, or other type of fraud.
• Be suspect of performance guarantees or suggestions that there’s no risk associated with the investment. All securities investments carry some degree of risk.
• Be wary of assertions that the company plans to conduct an initial coin offering or if the company claims to be transitioning from one type of business to a new focus on cryptocurrency or blockchain technology.
• Promoters might use testimonials, charts or other props to make a case for your buying the stock. Be aware that this information might be fabricated and that legitimate websites and domain names, including those of regulators, can be spoofed.
• Get a second opinion. An investment reviewed by a third party without time or emotional investment in a pitch can be a vital voice of reason and caution.

If you're suspicious about an offer or if you think the claims might be exaggerated or misleading, you can file a complaint with FINRA.

Learn more about protecting your money.