U.S. CFTC Issues Fraud Advisory Warning to Cryptocurrency Investors
The Commodity Futures Trading Commission (CFTC) has issued issued a client protection advisory warning customers that they should be distrustful of pump and dump systems that might appear in cryptocurrency, digital coins or tokens.
The Comments were made during a meeting in Washington on Wednesday. In addition to developing blockchain technology and Distributed Registries (DLT) and virtual currency technologies, the committee also covered areas such as data analysis, artificial intelligence, cloud technologies, and automated trading and cybersecurity.
The report describes how marketers orchestrate groups of pump relief systems to manipulate the price of individual cryptocurrencies, often through fraudulent tactics such as spreading the wrong or misleading reports via social media.
“As with many online scams, this scam is not new – it’s simply using a new technology to exploit the public interest in digital assets,” said CFTC director of public affairs, Erica Elliott Richardson.
“Pump and dump schemes have existed long before the advent of virtual currencies and generally evoke the image of penny stock brokers, but customers need to be aware that these scams have evolved and are spreading online, and the CFTC is encouraging all customers to thoroughly research potential investments, learn about common investment fraud tactics, and avoid investment opportunities that they do not fully understand.”
The CFTC has received complaints from customers who have lost money on pump and dump scams and the CFTC has a general power to combat fraud and manipulation of virtual money markets as a commercial product Interstate.
The report adds that under current US law, the CFTC cannot directly control the spot markets. Its job, however, is to investigate fraud and market manipulation, which also extends to the cryptocurrency trading. Investors should however protect themselves by buying only virtual currencies, digital coins or tokens that have been thoroughly researched.
The CFTC has issued several more fraud warnings for clients that contain warning signs of fraud, including investments such as precious metals, foreign exchange reserves, binary options and internet-selling systems.
Meanwhile, the Republican Commissioner of the CFTC, Brian Quintenz, has encouraged participants to adopt self-regulatory standards and best practices, although lawmakers and regulators are considering whether the current status of the crypto market justifies formal supervision at the federal level.