How To Warn Clients About Digital Asset Fraud

There is a growing interest in digital assets, but this investment sector is also rife with scammers and various forms of fraud. Financial advisers thus have the responsibility to help interested clients stay informed and protected.

The Adviser’s Role in Protecting Digital Assets

As of April 2026, the Department of Financial Protection and Innovation has identified 561 websites hosting crypto scams, all sourced from customer complaints.

Financial advisers play an important role in helping clients manage their digital assets, especially around cryptocurrencies. Unlike traditional investments, crypto assets often operate outside of clear regulations, making them easier for scammers to exploit and harder to control.

For these reasons, advisers should have honest, comprehensive conversations with clients that cover topics beyond potential returns. Discussions should cover risk awareness and fraud prevention to help people understand the opportunities and risks that come with digital assets.

Setting expectations early makes it easier to guide clients and avoid misunderstandings.

Decoding Common Digital Asset Scams

Digital asset scams take many forms, but many follow similar patterns. Teaching clients about these strategies can help them avoid costly mistakes.

“Pig Butchering” and Romance Scams

These scams build trust over time, much like fattening up a pig for slaughter. A scammer may connect with a client through social media or messaging apps and slowly form a relationship. In the case of romance scams, the relationship is romantic in nature.

After the scammer builds trust, they introduce a fake investment opportunity. Clients may see fake profits at first, which encourages them to invest more. Eventually, the criminal disappears with the funds.

Phishing and Fraudulent Websites

Phishing is one of the most common threats to digital assets. In the first quarter of 2025, over 1 million phishing attacks were recorded by the Anti-Phishing Working Group.

This type of scam uses emails or messages that look like they come from real platforms or trusted institutions. The messages often include links to fake websites that appear nearly identical to trusted exchanges or wallets. Once someone enters their details, scammers can access and drain their accounts.

Pump-and-Dump Schemes

These scams rely on hype. A group promotes a low-value token online to drive up its price. As more people invest, the price increases. The organizers then sell their shares at the peak of the token’s popularity, causing the price to drop quickly. Late investors end up dealing with the losses.

Ponzi and Pyramid Schemes

These schemes promise steady or high returns. Early investors may receive payouts, but these come from money put in by new financiers. Eventually, the flow of new money slows down, and the scheme collapses.

Red Flags Clients Need to Watch For

Advisers should give clients a simple list of warning signs to remember, which can include:

Promises of guaranteed or very high returns.
Pressure to act fast or invest more money.
Unsolicited offers through social media, email or messaging apps.
Unclear or overly complex explanations.
No clear or verifiable track record.
Problems withdrawing funds or unexpected withdrawal fees.

Going over these red flags regularly can help clients make better decisions.

A Framework for Proactive Due Diligence

Avoiding scams is important, but clients should also learn what legitimate projects look like.

A structured, data-driven approach to due diligence works best. As digital assets become more complex and widespread, advisers should guide clients toward reliable tools and data sources that provide accurate, real-time information to enable deep-dive research.

Advisers can also encourage clients to ask important questions like:

Who is behind the project?
What problem does it solve?
Is there clear and public documentation?

Actionable Steps for the Advisory Practice

Advisers can take a few practical steps to better protect their clients.

Develop Educational Materials

Simple resources can make a big difference in educating clients. A short guide or email that explains common scams and red flags can help people stay alert. Advisers should ideally keep these updated as new threats appear.

Document All Conversations

It is important to document discussions, especially about high-risk investments. Advisers should note key points, including risk disclosures and client acknowledgment. This practice ensures transparency and compliance, especially if things go south.

Stay Informed

Digital asset fraud changes quickly, especially as new technologies become available. For example, Gartner has reported that AI technologies like deepfakes have been responsible for social engineering scams and direct cyberattacks.

Advisers should keep learning through industry updates and research, as staying informed can help them give accurate and timely advice.

Move Toward Better Investment Decisions

Digital asset fraud is a real and growing risk, but advisers can help clients stay safe by focusing on education and proper due diligence. By building awareness and encouraging smart decision-making, they can reduce the chances of fraud and strengthen client trust.