CFTC Released a Warning for Investors on Pumps and Dumps on Cryptocurrency Market

Published on 16 Feb. 2018
1200px bulle und b r frankfurt

U.S. Commodity Futures Trading Commission has published a warning that advises investors watch the pump and dump schemes based on cryptocurrencies.

The warning for customer protection was published by the head of the regulator of the American market in Thursday, February 15, which appealed to investors to carry out their own investigation before investing in cryptocurrencies, especially those having small market capitalizations and illiquid markets.

The customers should not buy virtual currencies, digital coins or tokens based on advice from social networks or sudden price jumps. Thoroughly study virtual currencies, digital coins, tokens, and companies or organizations connected with them to separate advertising from facts,”

- advises CFTC.

A newsletter describes in detail how the groups of traders organize pump and dump schemes to manipulate prices on particular cryptocurrencies. They often use fraudulent tactics such as distributing inaccurate or deceptive news in social networks.

CFTC explains that these schemes are not new - they are just deployed for the latest technology to benefit from the interest of publicity in the digital assets.

Pump and dump schemes have appeared much earlier than virtual currencies, and usually remind a “Boiler Room” [technology of using the databases of the potential investors’ phone numbers by traders, to make customers purchase speculative or fraudulent securities], but users must know that these schemes still exist and develop on the Internet.

- said the head of public relationsErica Elliott Richardson.

Indeed, the incidence of the pump and dump schemes and the inability of some investors to identify them are top reasons why Facebook has banned the advertising of the cryptocurrency-related issues on its platform. 

The article also adds that, according to the current US legislation, CFTC cannot directly control the spot markets. However, the Commission has a right to investigate frauds and manipulations of the market – power that is extended on the cryptocurrency exchanges as well.

Head of CFTC J. Christopher Giancarlo, who won the hearts of multiple cryptocurrency enthusiasts by his opening speech on the Senate hearings, advised legislators meticulously adapt any new federal regulative norms on cryptocurrency exchanges to solve specific risks on spot markets.

Meanwhile, a member of CFTC Brian Quintenz has called the industry representatives to adopt self-regulative standards and best practices, even if the legislators and regulative organs are considering the issue at the moment and the state of cryptocurrency markets requires official control on the federal level.

The first example of similar self-regulation was demonstrated by the cryptocurrency industry of Great Britain. This week, seven biggest crypto companies have joined to form the first trading association and to regulate this field in the country.


More news

Ukraine Will Regulate Cryptocurrencies as Financial Instruments

Ukrainian financial regulators plan to recognize cryptocurrencies as the financial instruments such as shares, obligations, or bills.

15 Aug. 2018

Bitcoin Dominates in Conditions of “Altpocalypse”

The main world cryptocurrency expands its leadership in the market capitalization despite the “parachute jumps” and drop in price under $6000.

14 Aug. 2018

Bitcoin Fell Below $6000

Bitcoin fell below the support level of $6000. The recent optimism concerning the growth of Bitcoin turned out to be insufficient to encourage investors to keep the tendency.

14 Aug. 2018