The US SEC released new investor alert on the rising popularity of initial coin offerings and cryptos, tokens, and coins which is seen as the main reason for growing scams and exploits among retail investors so let’s read more in our latest cryptocurrency news today.
The US SEC released new investor alert that was shared by the Office of Investor Education and Advocacy and Division of the Enforcement Retail Strategy Task Force which outlined devastating losses faced by the retail investors due to scams. The SEC attributed the popularity of initial coin offerings, coins, tokens, and more as the main reason for the growing scams and exploits. The SEC said that the price surge of certain assets was a key factor for scammers to lure in inexperienced investors:
“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).”
The Investors’ FOMO is mainly attributed to the recent bullish performance that is shown by numerous tokens and NFT initiatives as the alert acknowledged that one of the main reasons for the FOMO among investors was the mindset that they will miss the opportunity to become wealthy. To help the investors stay in the clear, the SEC suggested digital asset investors understand and evaluate the risks, in addition, to look out for warning signs of scams like promises of high investment returns and unclear license as well as registration status and fake testimonials.
The SEC outlined the BitConnect $2 billion scam which resulted in huge losses for the retail investors:
“The platform allegedly paid investor withdrawals out of incoming investor funds and did not trade investors’ Bitcoin consistent with its representations, leading the platform to collapse and investors to lose massive amounts of money.”
Gary Gensler as the chair of the SEC reiterated the need for a regulatory framework that can help the investors avoid scams and other related risks. Gensler said that the crypto’s relevance in the next five years will be dependant on the public policy framework and he said that “fiannce is about trust.”
As reported, The Financial Times reported that SEC head GaryGensler asked Congress to empower his agency to be better in governing the market but it is not clear yet which agency has oversight of the crypto industry so regulators classify BTC as more of a commodity than security. It is estimated that less than 10% of the world knows about crypto but it is still a large enough number that prompted regulators to start finding new ways to regulate these assets.