US Regulator Issues Cryptocurrency Pump And Dump Schemes Warning


Following the US SEC warning on cryptocurrency, now the CFTC has issued a customer advisory on cryptocurrency investments. The US regulator issued a cryptocurrency pump and dump schemes warning, but has the CFTC also a solution? 

16 February, AtoZForex – Joining a chorus of regulators, the U.S Commodity Futures Trading Commission (CFTC) has raised the red flag on cryptocurrency pump and dump schemes. To avoid falling victim, CFTC has advised investors to beware of the penny-stock traps. These frauds are now also active on the growing cryptocurrency market.

As history has it,  “boiler room” fraudsters aggressively sold penny stocks by building hype around cheap assets, making false promises that some companies were on the verge of major breakthroughs and at the eleventh hour. Once the shares hit a certain price, they dumped the stock, leaving investors with nearly worthless stock. This fraudulent practice has been increasing in the cryptocurrency market, which raised the concerns of the CFTC.

CFTC Cryptocurrency Pump And Dump Schemes Warning

Evidently, Pump-and-dump schemes have been around long before the emergence of virtual currencies and digital tokens. Similar frauds now occur on mobile messaging apps or Internet message boards on crypto-investments. To inform and educate the public, the CFTC has issued a pump and dump schemes warning, below are some of the key highlights;

“Customers should not purchase virtual currencies, digital coins, or tokens based on social media tips or sudden price spikes. Thoroughly research virtual currencies, digital coins, tokens, and the companies or entities behind them in order to separate hype. Commonly, it is the people pulling the strings who get out first making the most in the scheme, and leaving everyone else scrambling to sell before losing their investment.”

CFTC Chairman suggests self-regulation in crypto market

Hinting that its own oversight is limited in these markets, the Commissioner Brian Quintenz has advised that crypto-companies should regulate themselves. The Chairman of CFTC, Christopher Giancarlo has also suggested for self-regulation as he testifies on Thursday before the Senate Agriculture Committee. In his statement, Giancarlo told the Senate committee that;

“They need to know they’ve got a responsibility in cleaning up this industry if they really wanted to be something that bears the respect and becomes part of not only our future but their future as well.” 

The global regulators’ warnings on cryptocurrency have echoed significantly. Impacting also the US regulators, as the Financial Industry Regulatory Authority (FINRA) issued an “investor alert” in December last year, charging investors to thread with caution against cryptocurrency investments. In a statement, Finra stated that;

“Even when legitimate companies flock to a hot, new sector, fraudsters almost always follow suit, exploiting the news to launch their latest frauds du jour. Don’t be fooled by unrealistic predictions of returns and claims made through press releases, spam email, telemarketing calls or posted online or in social media threads.”

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