Tech Driven Scams On the Uptick - Regulators Have Taken Notice

State securities regulators are witnessing a notable increase in technology-driven scams, particularly those involving digital assets and social media platforms. This surge in fraudulent activities has prompted an intensified effort among regulatory bodies to protect investors and maintain market integrity.

The North American Securities Administrators Association (NASAA) recently disclosed findings from its enforcement survey for 2022, which revealed a concerted effort by member agencies to combat scams associated with precious metals, commodities, digital assets, and internet-based fraud.

Claire McHenry, NASAA President and Deputy Director of the Nebraska Department of Banking and Finance, emphasized the proactive stance of state securities regulators in safeguarding investors from predatory schemes.

The report from NASAA highlighted a shift in the nature of investigations, with digital assets surpassing stocks and equities as the primary focus of regulatory scrutiny in 2022. This shift underscores the evolving landscape of investment scams, with digital assets attracting a significant number of investigations and enforcement actions due to their increasing prominence and complexity.

Joe Rotunda, Director of the Enforcement Division at the Texas State Securities Board, pointed out the challenges regulators face in dealing with these sophisticated and tech-heavy investigations. The complexity of cases involving digital assets has not only made the regulatory work more demanding but also prolonged the duration of investigations. In 2022, securities regulators embarked on 5,136 new investigations, contributing to a combined caseload of 8,538 when including ongoing cases from previous years. This marked increase from 2021 reflects the growing intricacy and volume of financial fraud schemes.

Collaboration among state regulators has proven essential, especially in addressing intricate crypto operations. NASAA cited several enforcement actions against crypto companies, demonstrating the collective effort to tackle fraudulent activities within the digital asset space. However, the challenge of returning lost funds to victims of fraud remains, with the recovery process often hindered by the vanished or inaccessible nature of the assets involved.

The future of financial fraud appears increasingly reliant on technology, as evidenced by the rising number of investigations into social media and internet-based schemes. The anticipation of artificial intelligence becoming a significant source of financial scams by 2024 further underscores the need for regulators to adapt and respond to the rapidly changing technological environment.

NASAA's findings highlight the ongoing and future challenges facing state securities regulators in their mission to protect investors from emerging threats in the digital age.


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