U.S. regulator warns of cryptocurrency 'pump-and-dump' schemes
Feb 16, 2018 Posted / 1692 Views
In an interview with Reuters, The Commodities Futures Trading Commission told that it has received complaints from various investors where they put their money on a digital coin following the tips and tricks on social media which resulted in immediate rise and fall in the value of the currency. CFTC named such schemes “pump and dump” and warned investors to stay away from such suggestions available on social media as it is another scam of crooks.
The director of CFTC, Erica Elliott Richardson claimed that it is not the first time that scammers are using this trick. Every time with an emerging technology the crooks play with the public
“As with many online frauds, this type of scam is not new - it simply deploys an emerging technology to capitalize on public interest in digital assets,” - Erica Elliott Richardson
The virtual tokens are not supported by the government yet and in such circumstances, CFTC’s warning acts as a regulation based on close examination of cryptocurrency. The trend of virtual tokens started rising with the year 2017 and coins like Bitcoins and Ethereum touched the skies.
The investors who bought Bitcoins after its 70% fall from $20,000 USD to $6,000 USD are enjoying the volatile nature of the coin as after two weeks of patience the Bitcoin has recorded $10,000 USD value.
As per CFTC, the cryptocurrency is a commodity and majority of coins are regulated on anonymous exchange platforms that lack trust and security. Such transactions result in scams as exchange gets infected by hackers. Further CFTC stated that “pump and dump” schemes usually takes place in unknown public chatrooms and social media and attacks gullible investors.
In “pump and dump” scheme a swindler spreads a misleading post and “pumps” an investor to put his stakes as per scammers interest which results in inflation of that particular coin. Later on, the crook, sell out his holding at inflated price i.e. “dump” and enjoys benefits ripping off the investor.
“The price falls and victims are left with currency or tokens that are worth much less than what they expected,” – CFTC
In a Senate hearing the chairman of CFTC, Christopher Giancarlo announced that the regulators are working to control actions of manipulators of the virtual economy. They are tracking frauds and planning to take strict action against them.
Applancer is an open platform for discussion on all things like Blockchain , Cryptocurrency and Ico news updates. As such, the opinions expressed in this article are the author's own and do not necessarily reflect the view of Applancer .
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