CFTC Warns Potential Crypto Buyers To Do Homework Before Investing

The Commodity Futures Trading Commission (CFTC) has warned potential buyers to exercise caution and conduct extensive research before purchasing digital coins or tokens, including those self-described as “utility coins” or “consumption coins.”

“Understand what rights are attached to the coin or token being sold, and what underlying factors could affect its value. Be especially wary of promises or guarantees of future value,” CFTC says in an advisory issued on Initial Coin Offerings (ICOs) and crypto-assets.

Several studies and news reports indicate that a large number of Initial Coin Offerings (ICOs) are fraudulent or the underlying products or services fail to live up to their promises. Estimates of fraud range from 5 percent to more than 80 percent of ICOs.

One report also identified nearly 300 offers that contained plagiarized investment documents, promises of guaranteed returns or fake executive teams.

According to a recent report, after one year from their ICO, nearly half of the projects or companies have failed or shut down.

The commission has made it clear that the digital coins may be securities, and their offer and sale would be subject to federal securities laws. Digital tokens and coins can also be derivatives or commodities, depending on how they are structured, the report says.

CFTC has cautioned would-be buyers of a digital coin or token that it is important to weigh multiple factors that could impact its current or longer-term value.

It reminds customers that buying digital coins or tokens with a plan to sell them at a higher price later carries considerable risk, regardless of how good a white paper, application or business plan sounds.

Potential investors have been advised that before investing in an ICO, ask whether the digital coins or tokens are securities and if the offering is registered with the Securities and Exchange Commission (SEC).

CFTC encouraged the public to report if fraud or theft occurs, or ICOs have been identified as frauds, to CFTC.gov/TipOrComplaint.

“Beware promises of quick wealth or guaranteed returns. There is no such thing as a guaranteed investment or trading strategy,” the advisory reminds.

by Joji XavierRTTNews Staff Writer

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