SEC Issues Investor Alert Over Crypto Investments
On March 23, the US Securities and Exchange Commission (SEC) issued a notice highlighting several reasons why investors should be cautious about investing in crypto-asset securities.
“Investments in crypto-asset securities can be exceptionally volatile and speculative, and the platforms through which investors buy, sell, borrow or lend these securities may lack important investor protections.”
The SEC said firms offering crypto investment services may violate several applicable laws, including the federal securities laws. The regulator added that the law requires anyone offering securities to register with the commission to enable proper regulation and supervision of the industry.
The bulletin mentioned that crypto exchanges’ proof of reserves is not a standard audited financial statement. According to the regulator, investors should exercise extreme caution when relying on such statements to make decisions.
The SEC further warned that crypto assets can be exceptionally risky and often volatile. The commission said they are exposed to significant risks ranging from enforcement of regulations that could prevent their use to bankruptcy of the company holding the assets.
The regulator also noted that fraudsters are using the crypto-asset’s popularity to defraud retail investors. It mentioned Ponzi, pyramid schemes and carpet schemes as some of the ways these bad actors carry out fraudulent activities.
SEC wrote:
“It’s never a good idea to make an investment decision just because someone famous says a product or service is a good investment.”
In the meantime, the SEC provided some investment tips that can help ensure investment success.
The language and timing of the publication are raising eyebrows as the regulator has increased its scrutiny of the industry. On March 22, the SEC filed charges against crypto-founder Justin Sun and issued a well notice to the US exchange Coinbase.
In addition, the bulletin comes a few days after the White House Council of Economic Advisers published one report that heavily criticized cryptocurrenciesand says that most people do not have a fundamental value.
“They continue to cause risks to financial markets, investors and investors and consumers,” the report added.
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