The true power and impact of the
The North American Securities Administrators Association on Wednesday issued an
Defined by the NASAA as a series of standalone or interconnected virtual worlds that provide users with immersive experiences through virtual or augmented reality technologies, the metaverse is quickly gaining traction among both tech nerds and noobs. But with that growth comes the opportunity for scammers to offer a variety of fraudulent investment opportunities, including virtual real estate, NFTs and cryptocurrency.
NASAA President and Maryland Securities Commissioner Melanie Senter Lubin warns that a lack of regulation in the metaverse, combined with the ability to operate from anywhere in the world, make it easy for fraudsters to hide their financial schemes.
Security lapses on developing platforms and the ability to build fake metaverse experiences can also lead to hacks, fraud or the theft of users' funds.
"Investors should keep in mind that every investment comes with risk, and no investment can be guaranteed against loss," Lubin said. "Our experience with so-called investment opportunities found in the metaverse is that we see the same old financial scams simply dressed in new clothes and offered to investors in the metaverse. Investors need to be wary of any investment that is promising unrealistic returns with minimal risk."
The advisory explains the risk of metaverse-focused investment scams and frauds and how investors can protect themselves if they consider investing in this emerging realm.
Tips include verifying that the investment and person/entity offering the investment scheme are registered with one or more securities regulators; never discussing investments or sharing personal or account information with online avatars; steering clear of metaverse crypto or NFT investment offers; and "don't fall for the hype."
"Fraudsters use popular and emerging social networks to push out hundreds, even thousands, of posts to promote illegal investment offers. They may also create videos that will circulate widely on various platforms to explain how and why the investment is the next big thing," the advisory states. "Even if a video, post or article receives a lot of views, likes or comments, it does not mean the investment offer is real or worth investing in."
The concern is not limited to U.S. securities experts. Earlier this month,
The firm says although investors may not be dabbling in NFTs or the metaverse right now, there is a chance they will in the near future. NFTs started the year by setting a monthly sales record with $4 billion in trade activity, according to Morgan Stanley.
Meanwhile,
Because no single vendor can own the metaverse, Gartner expects the virtual economy to be supported by digital currencies and NFTs. Gartner also believes it will impact how work gets done.
Enterprises have the ability to provide better engagement, collaboration and connection to their remote employees through immersive workspaces in virtual offices. That eliminates the need for businesses to create real-world infrastructure, and virtual events that have gained popularity over the past two years will offer more immersive networking opportunities or workshops.
"Enterprises will have the ability to expand and enhance their business models in unprecedented ways by moving from a digital business to a metaverse business," said Marty Resnick, research vice president at Gartner. "By 2026, 30% of the organizations in the world will have products and services ready for metaverse."
Morgan Stanley said popular metaverse schemes include pump-and-dumps, phishing sites, fake social media sites and phony NFTs.
"Where there's money to be made, cybercriminals will be looking for opportunities to exploit it," the Morgan Stanley advisory says.
The worries also escape the confines of our borders. Earlier this year, the China Banking and Insurance Regulatory Commission, China's financial services watchdog,
And on Wednesday, a new research report published by Information Services Group touched on a heightened level of cybersecurity threats in
Diane Young-Spitzer, Massachusetts securities division director and general counsel, said it is important to research the legitimacy of any investment opportunity before participating.
Fraudsters may use the name of a real-world business to legitimize a fake investment or financial service offered in the metaverse, according to the NASAA. Because companies are still evaluating whether to operate in the metaverse, it's best to verify metaverse investment promotions by making direct contact with a representative of the real-world business or brand outside of the virtual world where you encountered the offer.
Also be on the lookout for the same investment fraud red flags you look for in the real world. Scammers may say a metaverse investment has little or no risk while offering guarantees that your money will be safe because you are part of an online community and the blockchain.
"Remember: every investment comes with risk, and no investment can be guaranteed," the advisory states. "Understand the risks and make sure you are comfortable with them, including the possibility that you might lose your entire investment."
For Alabama Securities Commission Director Joseph Borg, it all boils down to a virtual environment having the power to create world heartache.
"The metaverse provides brands with new commercial opportunities, and investors are now being exposed to the latest high-tech products," he said. "However, bad actors are now leveraging interest in these opportunities and products. Virtual reality can leave you virtually broke."
