Corruption News

SEC Chief Recounts Three Ways To Spot A Cryptocurrency Scam

0

Is it difficult to spot a crypto scam? According to SEC Chairman Gary Gensler, it’s not as difficult as it might seem.

In a Twitter space for the US Army, Gensler and SEC Commissioner Caroline Crenshaw discussed what they see as the dangers of investing in cryptocurrency and how to tell if a project is a scam.

“If something seems too good to be true, sometimes it really is,” Gensler said. “There are certain red flags you can look for beyond just too good to be true.”

Overall, Gensler laid out three tell-tale signs that something may be a scam: (1) the crypto project is unable to provide clear documentation of how it works or how it plans to accomplish its goals; (2) the project cannot demonstrate that it complies with the legislation; and (3) the project can’t easily explain what it is at all.

Gensler also said high-yield offerings are a red flag and warned against projects that are overly complicated or rush an investor into a decision, praying to “FOMO,” or fear of missing out.

The SEC chairman also once again reiterated his belief that many cryptocurrencies may be unregistered securities.

“The majority [de las criptodivisas] they’re not following securities laws, but they should be,” he said. “It’s the Wild West, I would say you really have to wonder if there’s a ‘there’ there.”

Presenting a bleak outlook on the future of the crypto industry, Gensler told the audience that most cryptocurrencies, more than 15,000 tokens currently on the market, will ultimately fail.

“It’s important to understand that cryptocurrencies are novel and speculative,” Crenshaw said. “There are really, really low protections for investors because most of them haven’t chosen to go into the SEC realm.”

Pointing to the history of crypto scams, Crenshaw said there needs to be more transparency in the industry.

“They are known for their scams, and they claim to be transparent,” Crenshaw said. “What is on the blockchain is transparent, but the rest of what is there is not transparent.”

Although Crenshaw did not call FTX by name, the specter of Sam Bankman-Fried’s defunct cryptocurrency exchange continues to haunt the cryptocurrency market. FTX, once a dominant player in the cryptocurrency sector, imploded in November after a rush of withdrawals that proved unsustainable. The liquidity crisis forced the company to admit that it did not have individual reserves of client assets and to declare bankruptcy.

Since then, Bankman-Fried has been arrested and charged with eight financial crimes, including wire fraud and conspiracy to commit money laundering, in connection with the stock market crash. At the moment, there are still billions in client assets unaccounted for, and millions of clients still don’t know if they will ever see those funds again.

“The bottom line is that there is increased risk when investing in these novel, speculative and volatile investments that really lack basic protections and regulations,” Commissioner Crenshaw said during the Twitter slots. “So if you’re considering investing in crypto, consider how much of your portfolio you’re putting into it, and certainly not more than you can afford to lose.”

Stay on top of crypto news, get daily updates in your inbox.

source: decrypt.co


Source link

Leave A Reply

Your email address will not be published.

AI Chatbot Avatar