Wrongful ICOs are taking advantage of their market novelty at an alarming rate to quietly evade federal and state systems that are specifically designed to protect investors from fraud. Scammers are quite aware that an ICO is nothing more than an offer of investment opportunity because it closely resembles an initial public offering of stock.
In late 2017, the Securities and Exchange Commission (SEC) issued a warning to consumers about initial coin offerings. An ICO might allege that it’s not a security at all, but “utility token” that provides investors with current or future access to a product or service. Under the SEC’s laws, however, a promoter’s sale of a security that has not been registered with the Securities and Exchange Commission and does not qualify for exemption from registration confers legal right on investors. Simply put, an investor who purchased a security from a scammer who ignored these registration requirements is entitled to a return of his/her investment.
Cryptocurrency trading is a high-risk investment that becomes increasingly speculative when there are unlawful players involved. There are some rules though that investors and traders can follow that may alleviate some of these risks. These rules are, but not limited to:
- invest only what you can afford to lose;
- research investment opportunities carefully;
- trade cryptopcurrency CFDs instead
There are a plethora of unregulated online exchanges and brokerage firms that sell cryptocurrencies. Investors should be wary.
