SEC warns investors: your crypto assets are at huge risk right now
The SEC warned investors last week that cryptoassets are at risk of significant losses. In particular, they warned many companies and said that every investor should be extremely cautious. Why?
The Securities and Exchange Commission is warning investors that investing in cryptocurrencies comes with extreme risks. The SEC warns that cryptoassets are speculative and very risky and investors should be cautious. The cryptocurrency market has seen large fluctuations recently and many platforms for purchasing cryptocurrencies may be at risk and out of compliance with applicable laws.
Fraud in the crypto industry is common and there are many scammers. The warning from the SEC comes more than a year after the crypto market lost $2 trillion in market value when bitcoin $BTCUSD-0.2%, ethereum $ETHUSD+0.3% and thousands of other crypto tokens plunged due to the Federal Reserve raising interest rates. Investors should thus be cautious and only risk money they can afford to lose completely.
"Investing in crypto assets can be extremely volatile, and platforms where investors buy, sell, borrow or lend these securities may lack important investor protections. The risk of loss to individual investors who engage in transactions involving cryptoassets, including cryptoasset securities, remains significant," the SEC warned.
This risk was on full display late last year following the spectacular implosion of FTX, which led to billions of dollars in losses for users who held their tokens on the platform.
And the warning comes just days after the SEC sent a notice to Coinbase suggesting that America's largest cryptocurrency exchange could be sued by the agency for potential securities violations related to asset listings and staking products.
"None of the major cryptoasset entities are registered with the SEC as a broker-dealer, exchange, or investment adviser - so investors may not receive the protections afforded by the rules applicable to these entities," the SEC said.
The fact that no crypto exchanges are registered with the SEC means that cryptocurrency investors "may not benefit from rules that protect against fraud, manipulation, front-running, and other misconduct," the SEC warned.
Finally, the SEC warned that fraud remains rampant in the crypto industry as "fraudsters continue to exploit the growing popularity of cryptoassets to lure retail investors."
"The only money you should risk in any speculative investment is money you can afford to lose entirely," the SEC concluded.
It's clear that the government crackdown on the crypto-industry is likely to continue following the Coinbase announcement, the arrest of Do Kwon, and recent charges against Justin Sun and celebrities like Lindsay Lohan and Jake Paul.
Please note that this is not financial advice.
