The US Securities and Exchange Commission (SEC) has listed some factors such as the rising popularity of initial coin offerings, including cryptocurrencies, coins, and tokens, as one of the main reasons for investment scams.
The Securities and Exchange Commission (SEC) of the United States has issued a fresh warning regarding investment schemes involving digital assets and cryptocurrency.
The Office of Investor Education and Advocacy and the Division of Enforcement’s Retail Strategy Task Force announced the “devastating losses” suffered by retail investors as a result of fraud.
The SEC blamed the rise in frauds and exploitation on the “increasing popularity” of initial coin offerings, which include cryptocurrencies, coins, and tokens.
According to the SEC, the price spike of certain digital assets has been a crucial component in luring naive investors:
“Investors may be less wary of investment prospects that are novel or ‘cutting-edge,’ or they may succumb to FOMO (fear of missing out).”
The recent bullish performance of several tokens and nonfungible token ventures is primarily to blame for investors’ FOMO.
One of the biggest causes of FOMO among investors, according to the warning, is the belief that “they will miss an opportunity to become extremely wealthy.”
To keep safe, the SEC recommends that digital asset investors understand and evaluate the risks, as well as search for warning indicators of potential fraud, such as promises of high investment returns, ambiguous license and registration status, and phoney testimonials.
The SEC cited BitConnect’s $2 billion fraud, which resulted in significant losses for individual investors. The company allegedly paid investor withdrawals out of incoming investor funds and did not trade investors’ Bitcoin in accordance with its promises, causing the platform to fail and investors to lose large sums of money, according to the notice.
Gary Gensler, the SEC’s chair, underlined the need for a regulatory framework to protect crypto investors from scams and other risks on Sept. 1.
According to Gensler, the relevance of cryptocurrency in the next five to ten years would be strongly dependent on a public policy framework. “Finance is fundamentally about trust,” he remarked in support of this statement..
