The chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, during Twitter Spaces session outlined three ways to identify a fraudulent cryptocurrency project.
“If something looks too good to be true, sometimes it is. There are certain red flags you can also look for,” he said.
Gensler named three signs of a potential scam:
- the project lacks clear documentation on how it works and how it aims to achieve its goals;
- the company does not demonstrate regulatory compliance;
- the project’s founders cannot explain in simple terms what it is about.
The head of the SEC warned listeners against high-yield offers and calls for hurried investments, citing FOMO. He noted that he regards most digital assets as unregistered securities.
In October 2022, Gensler named the centralized cryptocurrency market.
In November, U.S. Representative Tom Emmer criticized the head of the SEC for the failure to regulate the digital-asset industry, which led to the collapse of FTX.
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