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SEC warns investors against fraudulent ICOs
The US Securities and Exchange Commission (SEC) has issued a warning to investors against potential scams involving companies engaging in Initial Coin Offerings (or ICOs).
The alert follows recently issued trading suspensions on the common stock of certain issuers who made claims regarding their investments in ICOs or token related news. These include First Bitcoin Capital Corp., CIAO Group, Strategic Global, and Sunshine Capital.
The SEC’s Office of Investor Education and Advocacy said that fraudsters often try to use emerging technologies to lure potential victims to invest their money in scams. It added:
“These frauds include “pump-and-dump” and market manipulation schemes involving publicly traded companies that claim to provide exposure to these new technologies.”
“...“pump-and-dump” schemes involve the effort to manipulate a stock’s share price or trading volume by touting the company’s stock through false and misleading statements to the marketplace. Pump-and-dump schemes often occur on the Internet where it is common to see messages posted that urge readers to buy a stock quickly or to sell before the price goes down, or a promoter will call using the same sort of pitch.”
The agency noted that while capital raising via ICOs may provide fair and lawful investment opportunities, there may be situations in which companies are publicly announcing ICOs to affect the price of the company’s common stock. It said that it may suspend trading in a stock if it believes that a suspension is required to protect investors and the public interest.
The SEC appears to be ramping up efforts to tighten regulations in the digital currency space, particularly token offerings. In an investigative report issued late last month, the agency said that ICOs, which involve offers and sales of digital assets by virtual organisations using blockchain or distributed ledger technology (DLT), may be subject to the requirements of the federal securities laws.
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