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SEC warns: ICOs can be used in fraud schemes

The United States Securities and Exchange Commission, the governmental agency that often appears in the news related to digital currency regulations, has issued another warning to investors on its website.

This investor alert is dedicated to public offers from digital currency corporations and organizations and tells about how to avoid different scammers. As it tells, different cheaters try to persuade investors to give their money and finance the development of prospective technological advancements, prepare for the future or invest in technologies of tomorrow just to scam them. This is called ‘pump-and-dump’ strategy, when the price of asset is high due to the company’s misleading info, and when the company gets the money it wants, it gives nothing in return.

The Commission prepared some valuable educational tips for investors. Information is power, so a cautious investor should get as much data on the company he plans to cooperate with as he can, while not completely trusting what people say in social media and blogs. Investors must be “especially cautious” when it comes to ICOs. Companies which claim they are “SEC-compliant” without proving so, companies which describe their ICO in vague technological or legal terms can be very risky investment opportunities. These are the signs of possible fraud.

The SEC has also clarified its position on what might lead to them suspending the cryptocurrency organization’s trade operations: the lack of proper information, accuracy and fair trade. When it comes to information, every company must provide periodic reports where it tells all about its current financial status. If we look at how the SEC understands accuracy, it can be said that it simply demands truth in press releases and reports, especially about the current financial condition of the company. The last reason for suspension will be used if the SEC sees that the company uses something similar to trading by insiders, market manipulation and other unjust means of trading.

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