SEC warns investors about fraud in the crypto industry

The U.S. Securities and Exchange Commission (SEC) warned investors against investing in digital assets due to the high risk of fraud and the associated ‘destructive losses’.

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The statement was issued on behalf of the SEC’s Office of Investor Education and Advocacy and the Retail Trading Strategy Task Force.

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“Fraudsters continue to exploit the growing popularity of digital assets to lure retail investors […]. Investors may be less skeptical of investment opportunities tied to something new or ‘cutting-edge,’ or may be driven by FOMO,” said SEC representatives.

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They urged investors to watch for red flags, such as promises of high returns, unclear licensing status, and fake testimonials.

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As an example, the statement cites BitConnect. In 2018 the project was accused of running a pyramid scheme. At its peak, the native token’s price topped $500 and ranked in the top ten on CoinMarketCap.

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In September 2021, former BitConnect director and promoter Glen Arcaro pleaded guilty in a scheme with other participants to defraud investors.

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Earlier, SEC Chair Gary Gensler reaffirmed the importance of establishing a regulatory framework for cryptocurrencies. He said regulation is necessary ‘for the industry’s survival’.

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In August, Gensler warned of heightened oversight over stablecoins and DeFi. He argued that decentralization does not provide immunity from the Commission’s oversight.

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