The U.S. Securities and Exchange Commission (SEC) in its most recent Investor Alert has warned people investing funds in cryptocurrency of dangers to their funds.
According to the alert, investors face increasing danger of exploitation by fraudsters riding on the increasing popularity of cryptocurrencies to lure retail investors into scams.
“Crypto asset securities-related investments continue to be replete with fraud, including bogus coin offerings, Ponzi and pyramid schemes, and outright theft where the project promoter simply disappears with investors’ money.
“Investments in crypto asset securities can be exceptionally risky and are often volatile. Over the last year, the crypto asset space has been exceptionally volatile – and a number of major platforms and crypto assets have become insolvent and/or lost value, ” the alert said.
It also warned that investors face the risk of such investments firms failing or going bankrupt;
“Those offering crypto asset investments or services may not be complying with applicable law, including federal securities laws. Under the federal securities laws, a company may not offer or sell securities unless the offering is registered with the SEC or an exemption to registration is available.
“Similarly, the law requires parties such as securities broker-dealers, investment advisers, alternative trading systems (ATS), and exchanges to register with the SEC, a state regulator, and/or a self-regulatory organization (SRO), such as FINRA. Moreover, entities and platforms involved in lending or staking crypto assets may be subject to the federal securities laws,” it added.
