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The 4 Greatest Threats to Investors in 2022

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The stock market has just recorded one of the best three-year runs of the past half-century. Many investors likely expect the party will continue.

This is no time to be lulled into a sense of complacency, however. Investing is always a risky business. In most cases, those perils are tied to the ups and downs of market performance.

But scammers also can make investing more dangerous than it needs to be. Recently, the North American Securities Administrators Association (NASAA) revealed what it says are the top four threats facing investors in 2022.

Read on to learn more about these risks and how to keep them from emptying your wallet.

Cryptocurrency-related investments

cryptocurrency bitcoin
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Cryptocurrencies have been the trendy investment for a few years now. Some people have made a lot of money investing in these virtual forms of payment.

But NASAA says this type of investment might be riskier than you realize. In a press release, Joseph P. Borg, Alabama Securities Commission director and NASAA enforcement section committee co-chair, says:

“By far, NASAA’s securities regulators revealed that investments related to cryptocurrencies and digital assets is our top investor threat.”

Borg notes that in addition to a slew of stories in 2021 about those who raked in cash by investing in crypto, there were many other tales of those who “bet big and lost big.” He says the latter trend is likely to continue in 2022.

The NASAA warns that cryptocurrencies often are not well regulated and are ripe for scams that involve “public facing fronts for Ponzi schemes and other frauds.”

Promissory notes

Promissory note
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A promissory note is a written promise to pay the holder a defined amount of money at some point in the future. In general, these notes are legitimate. But the concept also attracts scammers, who know that promising high rates of return is tempting to some folks, especially seniors who need the cash.

As a general rule, licensed securities salespeople sell promissory notes to the general public. But scammers also use these tools to bilk unsuspecting investors. NASAA warns you to beware of promissory notes with durations of nine months or less. Such notes typically do not require federal or state securities registration.

Social media and internet investment fraud

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Thanks to the internet, we are more connected than ever before. But such links also leave us vulnerable to fraud.

Scammers use social media platforms such as Facebook, Twitter and LinkedIn to build trust with users before pouncing on new victims.

In many cases, fraudsters use online profiles to gain access to personal information, such as dates or places of birth, phone numbers, home addresses and even personal photographs. The crooks then use that information to craft highly specific pitches to members of the social network.

NASAA warns you to be wary of pitches that:

  • Make promises of high returns with no risk
  • Involve offshore operations
  • Require you to open an e-currency account
  • Recruit your friends
  • Feature professional websites with little to no information
  • Offer you no written information about the risks of the investment and procedures to get your money out

Self-directed individual retirement accounts

Roth IRA
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In themselves, self-directed IRAs are fine. This type of retirement vehicle allows you to invest money in things beyond stocks, bonds and mutual funds. Some people use a self-directed IRA to invest in real estate, for example.

But NASAA says some scammers use self-directed IRAs, or SDIRAs, to target retirees. According to the association:

“State regulators have brought several very recent multi-state actions against parties leveraging the purported legitimacy provided by SDIRAs to defraud the public, including the case brought jointly by 30 states and the CFTC against several Los Angeles precious metals dealers.”

In that case, scammers targeted $185 million from 1,600 mostly elderly investors, “including more than $140 million that came straight from retirement accounts,” NASAA says.

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