SEC latest investor warning targets digital currency scams and ICOs
The U.S. Securities and Exchange Commission (SEC) has issued a warning to investors to be wary of digital currency investment scams, in the latest note of caution over digital currency to be sounded by the regulator.
The announcement was published via the SEC’s Office of Investor Education and Advocacy and the Division of Enforcement’s Retail Strategy Task Force, noting that investors risked “devastating losses” as a result of scams and fraud. In particular, the SEC pointed to the rise of initial coin offerings, or ICOs, as one of the main sources of concern for investors in avoiding losing money.
The regulator also suggested that surging prices in digital asset markets have been a boon for scammers and fraudsters, in making investors less skeptical about their claims: “Investors may be less skeptical of investment opportunities that involve something new or ‘cutting-edge,’ or may get caught up in the fear of missing out (FOMO).”
With bullish market sentiments across some digital asset markets in recent months, the warning suggests investors may fall into the trap of not wanting to “miss an opportunity to become very wealthy.”
In its warning note, the SEC said digital asset investors should take steps to understand the full extent of the risks involved, as well as looking out for key warning signs that could point to fraudulent schemes. Among other things, these include claims of wildly high investment returns, fake testimonials, and dubious licensing claims.
The SEC note references the BitConnect scam, which resulted in $2 billion of losses for investors caught up in the scheme, as a cautionary tale for would-be digital currency investors.
“The platform allegedly paid investor withdrawals out of incoming investor funds and did not trade investors’ Bitcoin consistent with its representations, leading the platform to collapse and investors to lose massive amounts of money.”
It comes as the SEC is considering further developments to the legal framework around digital currency regulation in the United States.
Watch: U.S. Congressman Patrick McHenry discusses “Blockchain Policy Matters” with Bitcoin Association’s Jimmy Nguyen
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