Fraudulent Activities Incrementally Haunts Digital Assets

Investments in digital assets are by far the greatest danger to individual investors in 2022, according to a North American Securities Administrators Association annual survey of securities regulators. Fraudsters continue to take advantage of the growing popularity of digital assets to dupe retail investors, frequently resulting in catastrophic losses. According to NASAA's, fraudulent promissory note offerings, social media money scams, and frauds involving self-directed individual retirement plans are amongst those top-three lists of hazards to retail investors' financial activities. Investors are advised to take caution when purchasing popular and volatile unregulated products, particularly those involving cryptocurrency and digital assets, according to NASAA's authorities. "The most common telltale sign of an investment scam is an offer of guaranteed high returns with no risk. It is important for investors to understand what they are investing in and with whom they are investing," said Melanie Senter Lubin, NASAA President to CNBC International. Regardless, a sizable portion of the investors still believes in these fraudulent schemes. There were 82,135 reported crimes in the US alone involving cryptocurrencies such as bitcoin, ethereum, and other digital currencies, according to new research from the cryptocurrency education portal, Crypto Head. Other parts of the world have witnessed similar tendencies. In 2020, Australia had reported 9,689 cryptocurrency crimes, up from zero in 2016.

In Indonesia, we have seen many frauds induced in digital assets, such as those involved in binary options. Binary options are a form of fixed-reward option in which investors must guess the outcome of two possible results. They receive the agreed-upon compensation if their forecast is accurate. If they do not, then the initial stake will be forfeited. The term 'binary' refers to the fact that there are only two possible outcomes — win or loss. This practice is considered illegal in Indonesia because it doesn't hold legal authority. Head of Badan Pengawas Perdagangan Berjangka Komoditi (BAPPEBTI), Aldison Karorundak had stated in a media briefing, of Investment Alert Task Force on Monday (2/21). "Binary options are clearly illegal, there are no commodities traded there. It's just guessing the candle stick will go up or down." Additionally, BAPPEBTI, in collaboration with Pusat Pelaporan dan Analisis Transaksi Keuangan (PPATK), is attempting to shut down or block binary options platforms that continue to sprout up in the country. Head of PPATK Ivan Yustiavandana stated that his institution had halted transactions in 121 accounts. The banned transactions amounted to 353 billion Rupiah.

The question arose with this unprecedented catastrophe, how do we solve it? Regulatory pressure has prompted several cryptocurrency businesses to strengthen their anti-nefarious activity controls. When digital assets first gained traction, fraudsters took advantage of the significant cryptocurrency exchanges, many of which lacked anti-money laundering (AML) and know-your-customer (KYC) controls. Elliptic, a blockchain analytics firm, predicts that between 2011 and 2019, big exchanges facilitated the cash out of between 60% and 80% of all Bitcoin transactions by known criminal actors. This percentage has increased to 45% due to numerous crypto exchanges improving their processes. The US Treasury sanctioned a bitcoin exchange for enabling ransomware payments for the first time. Additional regulation or punishment may be forthcoming. Meanwhile, law enforcement agencies and the business sector are creating technologies that will enable them to trace criminal groups and their use of digital assets by evaluating cryptocurrency transactions on the blockchain. These procedures are intended to combat fraud in the digital asset community. To avoid all of these disastrous events, investors must also educate themselves on portfolio diversification in order to establish a safer investment environment for digital assets.

Sources :

Bloomberg

CNBC International

Financial Times

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