FINRA survey highlights crypto investors' fraud vulnerability
New findings from the FINRA Investor Education Foundation reveal that crypto and meme stock investors are more likely to fall for fraudulent investment offers. Younger and less experienced investors show heightened susceptibility. The report coincides with the rapid growth of tokenized stocks, raising concerns about regulatory protections.
The FINRA Investor Education Foundation's national survey, previewed for World Investor Week, indicates significant vulnerabilities among certain retail investors. Half of US retail investors said they would invest in a hypothetical opportunity promising a guaranteed, risk-free 25% annual return for five years, a scenario mimicking fraudulent schemes. Among crypto investors, that figure rose to 65%, compared with 44% for non-crypto investors. Investors who had purchased meme stocks or viral investments were even more susceptible, with 77% expressing interest versus 45% for those who had not.
Demographic factors amplify these risks. Sixty-four percent of respondents aged 18 to 34 said they would invest in the offer, versus 36% of those 55 and older. Similarly, 63% of investors with less than two years of experience were willing, compared to 40% of those with a decade or more. Income levels showed little difference in susceptibility. Social media also plays a role, with nearly three-quarters of respondents who sometimes base decisions on social media advice indicating they would invest.
“These findings reveal that a concerning number of investors might be vulnerable to investment fraud,” said Gerri Walsh, president of the FINRA Foundation. She urged investors to be wary of “the promise of little to no risk with unusually high returns.”
These insights come as tokenized stocks—blockchain-based assets tracking traditional equities—gain traction. Their combined value for retail investors reached $412 million in September, up from a few million dollars a year earlier. Platforms like Robinhood, Gemini, and Kraken have launched such products in Europe, while Robinhood and Dinari seek US regulatory approval.
Advocates argue tokenized shares enable 24/7 trading and faster settlement, but experts warn of risks including lack of ownership rights, voting, or dividends, plus counterparty exposure. “A lot of the burden gets shifted on you to understand what exactly it is that you’re buying,” said Diego Ballon Ossio, a partner at Clifford Chance in London. Peter Ryan, head of international capital markets at the Securities Industry and Financial Markets Association, emphasized: “Just because a security is represented on blockchain, that doesn’t change the core investor protections and other provisions that apply to securities.” The regulatory landscape remains unsettled, with calls for both exemptions and stronger oversight.