Cryptocurrencies and other digital coins business using the blockchain technology has become a booming business in the recent past with companies making tens and hundreds of million dollars. However, as the scale goes up, many investors have landed on the wrong hands and lost huge capital.
What is the main cause of such scams?
In SEC annual report, ICO has been mentioned dozens of times in 2018 unlike the previous year where it appeared only thrice, and not at all in 2016.
The investigations by SEC revolve around activities of selling digital tokens and any other blockchain related business. The main focus of SEC is on the ICO and digital assets as it termed in its annual report. Some companies fail to deliver their part of the bargain leading to in surmounted loss by the investors.
Besides the sale of the digital tokens, SEC is also putting its hands on the compliance of registration requirements of the federal securities laws. According to SEC, all the digital coins are regarded as securities.
Ideally, SEC’s mandate is to protect all investors intending to put their fortune in the blockchain related projects. Last year Sec launched a fake website selling “Howie coins” fake website against ICO fraud to help send a signal to all potential investors.
The fraudsters operation
The fraudsters have used celebrities to promote the ICO and the brokers who operate illegally the ICOs superstores. The cryptocurrencies startups have created investment hype in the world and the lucrative profits that come with it have made many investors become vulnerable to ICO’s Scam.
The alarm went ringing from mid-2017 when the sales of digital tokens through ICO fell terribly. In order to protect other pending investors, SEC had shifted agency to create a safer environment for businesspeople. The report by SEC does not dismiss all companies in the blockchain projects as scams. In fact, it acknowledges that some companies have acted well in the interest of their customers and have seen the promises made to the investors come to fruition.
For a year now, SEC has opened many investigations to the close of the financial year, 2018. That will bring out the real picture of the cryptocurrencies and blockchain scams that have milked dry the investors. Most of the pledges by the ICO have completely failed to take off in the past one year.