CFTC and SEC Warn Against Crypto Pump And Dump Scams On Social Media
Both the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) warned against cryptocurrency pump and dump scams.
On Thursday, The CTFC issued a release detailing the possibility of scams with pumping and dumping coins. The released joined its earlier warning this month about investing in crypto retirement accounts, according to Coinbase. This warning comes after an earlier SEC warning of similar scams surrounding Initial Coin Offerings (ICOs).
The CTFC’s statement said, ”Customers should not purchase virtual currencies, digital coins, or tokens based on social media tips or sudden price spikes. Thoroughly research virtual currencies, digital coins, tokens, and the companies or entities behind them in order to separate hype from facts.”
This sage advice serves any crypto investor well. Typically you don’t know who’s behind a keyboard pumping something up online.
In its statement, the CTFC outlined how a scam of this type might look.
It wrote, “Some pump and dumps use false news reports, typically about a famous high-tech business leader or investor who plans to pour millions of dollars into a small, lesser-known virtual currency or coin. Other fake news stories have featured major retailers, banks, or credit card companies, announcing plans to partner with one virtual currency or another. Links to the phony stories are also accompanied by posts that create false urgency and tell readers to buy now.”
The good news is that although its scope is limited, the CTFC intends to seek out and stop those who use these types of methods.