The U.S. Securities and Exchange Commission’s (SEC) Office of Investor Education and Advocacy on Monday warned investors about “potential scams” involving companies claiming to be involved in initial coin offerings (ICOs) as a way of artificially pumping up their stock prices.
Regulators in both Canada and the U.S. have recently issued notices indicating that ICOs may fall within the definition of securities, making them subject to securities rules.
The SEC’s investor alert targets a different concern, which is the risk of companies using the hype around ICOs to pump up their stock prices.
“Fraudsters often try to use the lure of new and emerging technologies to convince potential victims to invest their money in scams. These frauds include ‘pump-and-dump’ and market manipulation schemes involving publicly traded companies that claim to provide exposure to these new technologies,” the alert says.
In particular, companies may be, “publicly announcing ICO or coin/token related events to affect the price of the company’s common stock,” the alert warns.
The SEC recently issued several trading suspensions affecting the stock of companies that made claims regarding their investments in ICOs or touted coin/token related news, the alert notes.
Read: Cryptocurrency offerings must comply with securities laws: CSA