The US Securities and Exchange Commission (SEC) has announced a new scam alert against probable crypto scams defrauding the public. The announcement from the SEC office of Investor Education and Advocacy has highlighted the devastating losses faced by the public in the name of scams operating in the sector.
The SEC has a new chief in Gary Gensler has now identified the crypto sector as an avenue for the rampant investor fraud even though there are other sectors involved in shady activities as well. The SEC has once again highlighted the risks of Initial Coin Offerings (ICOs) and the rapid recent increase in price of some cryptocurrency projects as main cause of concern and advised the public to heed caution.
The SEC announcement read:
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).”
According to the commission’s point of view, users are likely to loose money if they think they aren’t acting fast enough and missing an opportunity of a lifetime to become really wealthy really quickly. To be fair, that is a big concern as many of the smaller cryptocurrency projects are often engaged in Pump and Dump schemes and make a mockery of investment ethics. It is also true that projects promising high returns with little investments are almost certainly scams and investors should keep away from them at any costs.
However, the same is true for many new IPOs and stocks on the S&P500, NASDAQ and other stock exchanges around the world. When there is investment, there is always a chance of losing money. So, while it is commendable that the SEC cares about the public and wants to inform them about the dangers of investments, it should also act in an unbiased manner and call out other sectors with potential scams. The way it is singling out the crypto sector shows that the agency mistrusts the sector and believes that it needs to be “reined in”. The new SEC chairman has also highlighted the dangers of the crypto sector and stated that it needs to fall under regulation for its own sake, otherwise it simply won’t be able to survive in the near future.
SEC is now building up a case to go against cryptocurrencies. It is also in deep litigation against Ripple (XRP). Its outcome may shape its future strategy.
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