SEC and 5 Other US Regulators Issue Crypto Investment Warnings – The U.S. Securities and Exchange Commission (SEC) and several other prominent financial regulatory bodies have jointly cautioned against investing in cryptocurrency assets during this year’s World Investor Week. These regulators have emphasized that the risk of financial loss is still substantial for individual investors who engage in transactions involving cryptocurrency assets, including crypto asset securities.
As part of this year’s World Investor Week, the SEC’s Office of Investor Education and Advocacy (OIEA) published an Investor Bulletin on September 29. This initiative is part of a global campaign supported by the International Organization of Securities Commissions (IOSCO), which aims to enhance awareness surrounding the significance of educating and safeguarding investors.
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The bulletin is the result of a joint collaboration among various organizations, including the SEC, the Financial Industry Regulatory Authority (FINRA), the Commodity Futures Trading Commission (CFTC), the National Futures Association (NFA), the Securities Investor Protection Corporation (SIPC), and the North American Securities Administrators Association (NASAA).
World Investor Week 2023 focuses on three main themes: Crypto Assets, Investor Resilience, and Sustainable Finance. In relation to crypto assets, the bulletin underscores various risks associated with cryptocurrency investments. “Investments in crypto assets can be exceptionally volatile and speculative, and the platforms where investors buy, sell, borrow, or lend these investments might lack important protections,” the bulletin cautions.
“Those offering crypto asset investments or services may not be complying with applicable law, including federal securities laws,” the regulators warned, adding: “Investors who deposit funds or crypto assets with a crypto asset entity might cease to have legal ownership of those assets and might not be able to get those assets back when they want to.”
Furthermore, the bulletin provides in-depth information regarding the risks that investors in cryptocurrency assets encounter, such as unregistered offerings, the absence of protection from the Securities Investor Protection Corporation (SIPC), and the potential for fraud. “Fraudsters continue to exploit the rising popularity of crypto assets to lure retail investors into scams, often leading to devastating losses,” the regulators described.
The regulators went on to clarify that in order to determine whether your portfolio, which includes retirement plans and investment accounts, contains any investments related to crypto assets, it is essential to proactively conduct research and pose relevant inquiries. “Investors should understand if they are being exposed to risky investments involving crypto assets,” they stressed.
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The last warning in the bulletin states: “The risk of loss for individual investors who participate in transactions involving crypto assets, including crypto asset securities, remains significant. The only money you should put at risk with any speculative investment is money you can afford to lose entirely”
The regulators additionally advised: “If you are considering a crypto asset-related investment, take the time to understand how the investment works and look for warning signs that it may be a crypto asset investment scam.” They recommended carefully reviewing all materials, asking questions, and watching for “the signs of a fraudulent trading website.”