The Vermont Department of Financial Regulation (DFR) issued an investor alert on July 20, 2023, highlighting the increasing risks associated with cryptocurrency investments on social media platforms and urging the public to exercise extreme caution.
The alert was prompted by a recent NPR story featuring 74-year-old Naum Lantsman, who lost his life savings to a cryptocurrency scam. Lantsman was lured by a company called SpireBit on Instagram, which claimed to be an “international financial broker” helping people invest in cryptocurrencies. After investing an initial $500, Lantsman was shown fake returns and was persuaded to invest more, eventually losing over $340,000.
DFR issues warning on crypto scams promising high returns
The DFR warns that the promise of high returns and the ability to bypass traditional financial system safeguards make cryptocurrencies attractive to scammers. The Federal Trade Commission (FTC) reports that crypto scams have surged by 900 percent on social media since the start of the pandemic. From the beginning of 2021 through the first quarter of 2022, over 46,000 people were defrauded of more than $1 billion in crypto-related scams. This is in addition to the hundreds of billions lost in the crypto market collapse of 2022 and the multi-billion dollar bankruptcies of crypto companies like FTX, Celsius, Voyager, BlockFi, Genesis, and others.
The DFR emphasizes that cryptocurrencies are not functional equivalents of traditional banking, securities, or insurance investment products. They also said that digital assets lack a lender of last resort, financial disclosures, and insurance protection for losses due to market fluctuations, theft, or scams. The department urges Vermont investors to be vigilant when using or evaluating crypto as an investment.
Crypto-related fraud have continued to rise, with the North American Securities Administrators Association ranking cryptocurrency and digital assets among the top investor threats.
It is essential to know that the Consumer Financial Protection Bureau received more than 8,300 virtual currency complaints, mostly from purported investments, from October 2018 to September 2022. Young adults aged 20 to 49 reported losing money to crypto scams at more than three times the rate of older age groups.
Scams are becoming more elaborate and complex, with con artists devising personalized tactics that include layers of deception. The DFR encourages victims to report fraud to law enforcement as quickly as possible to maximize the opportunity for recovery and protect other victims. The Internet Crime Complaint Center (IC3), run by the FBI, is the nation’s central hub for reporting cybercrime. Victims in Vermont are also urged to report to local authorities.
