Crypto relationship scams pose 'catastrophic harm,' SEC official says. Here's how to avoid them

cnbc.com:

Investors are at a heightened risk of cryptocurrency scams tied to fake relationships established over social media, dating apps and networking sites, federal officials warn.

Such frauds occur when scammers use dating apps, social media platforms, professional networking sites or encrypted messaging apps to pose as a romantic interest, old friend, investment professional or other acquaintance.

Fraudsters gain the trust of targets over time. At some point, they broach the idea of investing in crypto — and then defraud victims via fake investments.

More from Personal Finance:
How to avoid the top scam of 2023
FBI: 'Financial sextortion' of teens is 'rapidly escalating threat'
How this 77-year-old widow lost $661,000 in a common scam

«Relationship investment scams, including those involving crypto asset investments, pose a risk of catastrophic harm to retail investors, and the threat is increasing rapidly as these scams become more popular with fraudsters,» Gurbir S. Grewal, director of the Securities and Exchange Commission's Division of Enforcement, said in a press statement.

Last month, the SEC brought its first-ever enforcement actions tied to crypto relationship frauds. The SEC alleged criminals pilfered millions of dollars of investors' money in two separate schemes tied to WhatsApp, LinkedIn and Instagram and fake crypto asset trading platforms NanoBit and CoinW6.

Crypto, examples of which includes bitcoin and ethereum, is a digital currency. Itsuse has grown among criminals, according to the Federal Bureau of Investigation.

Consumers lost an estimated $5.6 billion from crypto-related scams in 2023, up 45% from 2022, the FBI said in a recent fraud report.

Investment scams accounted for about 71% of those total