The Securities and Exchange Commission (SEC) has issued a warning to investors, especially regarding meme coins. The financial regulatory authority aims to warn of the spread of fraud in the digital currency industry.
The Securities and Exchange Commission issues an urgent warning to investors
The day before yesterday, the Securities and Exchange Commission (SEC) published an article titled “5 Ways Scammers Can Lured Victims into Scams Involving Cryptoassets – Investor Alerts.”
In this article, the regulator warns investors about the different most common methods used by scammers to extract money from their victims. These methods include using hype surrounding new technologies, identity theft, false surcharges, and the use of social networks.
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However, among the methods used, the regulatory body also identifies the fact that “fraudsters can increase the price of the crypto asset and sell it at your expense.” This is a method commonly known as “pump and dump.” For example, we find meme coins. As the article shared by Wall Street Cop explains:
“Scammers can use a pump-and-dump scheme with crypto assets, including so-called meme coins that reference popular culture or internet memes.”
The pump-and-dump method effectively involves inflating the price of an asset to attract investors, but then dumping it to ensure that investors are unable to liquidate in time. For the SEC, this is the case with pre-sales organized via social networks on various meme coins. Where to warn:
“In general, after the promoters sell and take their profits, the price drops quickly and everyone who bought the tokens loses most of their money.”
Why is the SEC targeting crypto companies now?
To protect against this type of scheme, the SEC advises investors to exercise caution as a general rule:
“Never make investment decisions based solely on information from social media platforms or apps.”
The US financial regulator's warnings make perfect sense. However, the problem is that it is almost impossible to find information anywhere other than social media networks. This contributes to the speculative nature of this type of cryptocurrency.
Could you be a Wall Street cop warning investors that he intends to attack the meme ecosystem soon, because he considers it illegal? At the moment, the authority has not been really forthcoming about meme coins. However, based on the tone of the article, it doesn't seem like they really support this type of asset